MEND Micrus Endovascular (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

 

Filed by the Registrant  þ

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

þ   Preliminary Proxy Statement

o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Pursuant to §240.14a-12

 

Micrus Endovascular Corporation

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

Common Stock, par value $0.01 per share, of Micrus Endovascular Corporation

 

 

20,430,467 shares of Micrus common stock, which consist of: (i) 16,585,666 shares of Micrus common stock issued and outstanding as of July 27, 2010; (ii) 3,802,158 shares of Micrus common stock underlying outstanding options to purchase shares of Micrus common stock with strike prices below $23.40 as of July 27, 2010; and (iii) 42,643 shares of Micrus common stock subject to outstanding rights under Micrus Endovascular Corporation’s employee stock purchase plan based on payroll information for the period ending September 30, 2010.

 

 

In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying $0.0000713 by the underlying value of the transaction of $431,720,697.16, which has been calculated as the sum of: (a) the product of 16,585,666 issued and outstanding shares of Micrus Common Stock as of July 27, 2010 and the merger consideration of $23.40 per share; plus (b) the product of: (i) 3,802,158 shares of common stock underlying outstanding options to purchase shares of Micrus Common Stock with strike prices below $23.40 as of July 27, 2010, and (ii) the difference between $23.40 per share and the weighted-average exercise price of such options of $12.1910 per share; and plus (c) the product of 42,643 shares of Micrus Common Stock subject to outstanding rights under Micrus Endovascular Corporation’s employee stock purchase plan as of July 27, 2010 and the merger consideration of $23.40 per share.

 

 

$431,720,697.16

 

 

$30,781.69

 

 

 

 

 

 

 

 

 

 

 

 

Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

MICRUS ENDOVASCULAR CORPORATION

 

ANNUAL MEETING OF STOCKHOLDERS

 

 

[ l ], 2010

Dear Micrus Endovascular Corporation Stockholder:

 

We cordially invite you to attend Micrus Endovascular Corporation’s 2010 annual meeting of stockholders, which will be held at [ l ] on [ l ], 2010 at 9:00 a.m. Pacific Time. At the annual meeting, you will be asked:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of July 11, 2010, by and among Micrus, Johnson & Johnson and Cope Acquisition Corp., a wholly owned subsidiary of Johnson & Johnson.

2. To elect two Class II directors to hold office until the 2013 annual meeting of stockholders and until their successors are elected and qualified.

3. To ratify the appointment of PricewaterhouseCoopers as Micrus’s independent registered public accounting firm for the 2011 fiscal year.

4. To approve the adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies to adopt the merger agreement.

5. To transact any other business that may properly come before the annual meeting

The merger agreement contemplates the merger of Cope Acquisition Corp. with and into Micrus, with Micrus continuing as the surviving corporation and a wholly owned subsidiary of Johnson & Johnson. If the merger is completed, you will be entitled to receive $23.40 in cash, without interest and less any applicable withholding taxes, for each share of Micrus common stock you own. Micrus cannot complete the merger unless the conditions to closing are satisfied, including, among other things, adoption of the merger agreement by our stockholders and the receipt of specified governmental and regulatory approvals and clearances.

Our board of directors has unanimously determined that the merger agreement and the merger are fair to, and in the best interests of, Micrus and its stockholders, and has unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement. Our board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement a nd each of the other proposals to be considered at the annual meeting.

The accompanying proxy statement provides you with information about the proposed merger and the annual meeting. We encourage you to read the entire proxy statement carefully.

Your vote is very important. The merger cannot be completed unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote at the annual meeting. Whether or not you plan to attend the annual meeting, please complete, date, sign and return the enclosed proxy card or vote by Internet or telephone as instructed in the enclosed materials to ensure that your shares will be represented at the annual meeting. The failure to vote will have the same effect as voting against the adoption of the merger agreement. If your shares are held in “street name” by your broker, bank or other nominee, your broker will be unable to vote your shares without instructions from you. You should instruct your broker, bank or other nominee to vote your shares by following the procedures provided by your broker, bank or other nominee.

This proxy statement is dated [ l ], 2010 and is first being mailed, along with the enclosed proxy card, to stockholders on or about [ l ], 2010.

Sincerely,

John T. Kilcoyne

Chairman of the Board and Chief

Executive Officer

 

This transaction has not been approved or disapproved by the Securities and Exchange Commission, nor has the Securities and Exchange Commission passed upon the fairness or merits of this transaction or the accuracy or adequacy of the information contained in this proxy statement. Any representation to the contrary is unlawful.

 

MICRUS ENDOVASCULAR CORPORATION
Notice of Annual Meeting of Stockholders

 

 

The Micrus board of directors has unanimously determined that the merger agreement and the merger are fair to, and in the best interests of, Micrus and its stockholders, and has unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement. The Micrus board of directors unanimously recommends that Micrus stockholders vote “FOR” the adoption of the merger agreement.

 

In addition, the Micrus board of directors urges you to vote “FOR” items 2, 3, and 4 above.

 

Holders of Micrus common stock are entitled to assert appraisal rights if they comply with the procedures and requirements under Section 262 of the Delaware General Corporation Law (referred to in this proxy statement as the DGCL), a copy of which is attached to the accompanying proxy statement as Annex C.

 

More information on all of these matters is included in the accompanying proxy statement. You are entitled to vote on these matters and to attend the annual meeting if you held Micrus common stock as of the close of business on our record date, [ l ], 2010.

 

By Order of the Micrus Board of Directors

 

 

John T. Kilcoyne

Chairman of the Board and Chief Executive Officer

 

 

PURSUANT TO NEW RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION (SEC), WE HAVE ELECTED TO PROVIDE ACCESS TO OUR PROXY MATERIALS BOTH BY SENDING YOU THIS FULL SET OF PROXY MATERIALS, INCLUDING A PROXY CARD, AND BY NOTIFYING YOU OF THE AVAILABILITY OF OUR PROXY MATERIALS ON THE INTERNET. THIS PROXY STATEMENT AND OUR 2010 ANNUAL REPORT TO STOCKHOLDERS ARE AVAILABLE AT WWW.MICRUSENDOVASCULAR.COM.

 

TABLE OF CONTENTS

 

 

Unless stated otherwise or unless the context otherwise requires, all references in this proxy statement to Micrus, the Company, we, our, ours and us are to Micrus Endovascular Corporation, a Delaware corporation, all references to Parent are to Johnson & Johnson, a New Jersey corporation, all references to Merger Sub are to Cope Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent, and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of July 11, 2010, by and among Parent, Merger Sub and Micrus, a copy of which is attached as Annex A to this proxy statement.

 

This summary term sheet highlights material information regarding the merger contained in this proxy statement, but does not contain all of the information in this proxy statement that is important to your voting decision with respect to the adoption of the merger agreement or the other matters being considered at the annual meeting. To understand the merger agreement fully and for a more complete description of the terms of the merger, you should carefully read this entire proxy statement, including the attached annexes. In addition, Micrus encourages you to read the information incorporated by reference into this proxy statement, which includes important business and financial information about Micrus that has been filed with the Securities and Exchange Commission, which is referred to in this proxy statement as the SEC. See “Where You Can Find More Information.”

 

The merger agreement is attached as Annex A to this proxy statement. You are encouraged to read the merger agreement, because it is the legal document that contains the terms and conditions of the merger.

 

Micrus Endovascular Corporation.   Micrus is a Delaware corporation, incorporated in the State of Delaware in 1996, with its principal executive offices located at 821 Fox Lane, San Jose, California 95131. The telephone number of the Company is (408) 433-1400. The Company develops, manufactures and markets implantable and disposable medical devices for use in the treatment of cerebral vascular diseases. Micrus products are used by interventional neuroradiologists, interventional neurologists and endovascularly trained neurosurgeons to treat both cerebral aneurysms responsible for hemorrhagic stroke and intracranial atherosclerosis, which may lead to ischemic stroke. Hemorrhagic and ischemic stroke are both significant causes of death and disability worldwide.

 

Johnson & Johnson.   Parent is a New Jersey corporation, incorporated in the State of New Jersey in 1887, with its principal executive offices located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. The telephone number of Parent is (732) 524-0400. The following description of Parent and its business is qualified in its entirety by reference to Parent’s Annual Report on Form 10-K for the fiscal year ended January 3, 2010. Parent and its subsidiaries have approximately 114,000 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. Parent is a holding company, which has more than 250 operating companies conducting business in virtually all countries of the world. Parent’s primary focus has been on products related to human health and well-being.

 

Cope Acquisition Corp.   Merger Sub is a Delaware corporation, incorporated in the State of Delaware in 2010, with its principal executive offices located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. The telephone number of Merger Sub is (732) 524-0400. Merger Sub is a wholly owned subsidiary of Parent. Merger Sub was formed solely for the purpose of engaging in the merger and the other transactions contemplated by the merger agreement and has not engaged, and does not expect to engage, in any other business activities.

 

Date, Time and Place.

 

Micrus will hold its annual meeting on [ l ], 2010 at 9 a.m., Pacific Time, at [ l ] for the following purposes:

 

 

Record Date and Shares Entitled to Vote.   Only holders of record of shares of Micrus common stock as of the close of business on the record date, [ l ], 2010, are entitled to vote at the annual meeting. Each record holder will have one vote at the annual meeting for each share of Micrus common stock held by such holder as of the close of business on the record date. On the record date, [ l ] shares of Micrus common stock were issued and outstanding and such shares were held by approximately [ l ] holders of record.

 

Quorum Requirement.   No proposal may be acted on at the annual meeting unless a quorum is present. In order for a quorum to exist, at least a majority of the votes entitled to be cast at the annual meeting must be present in person or by proxy.

 

Treatment of Abstentions.   Affirmative abstentions will be treated as present at the annual meeting for purposes of determining whether a quorum is present, but will not be counted as votes cast for purposes of determining the approval of any matter submitted to Micrus’s common stockholders for a vote at the annual meeting.

 

Treatment of Broker Non-Votes.   Brokers, banks or other nominees who hold shares of Micrus common stock in “street name” for customers who are the beneficial owners of such shares may give a proxy to vote those customers’ shares on routine matters in the absence of specific instructions from those customers. The ratification of PwC as Micrus’s independent registered public accounting firm is considered a routine matter. Brokers, banks or other nominees may not give a proxy to vote those customers’ shares on the proposals to adopt the merger agreement, elect directors or to approve the adjournment of the annual meeting to solicit additional proxies adopting the merger agreement, which are not considered to be routine matters, in the absence of specific instructions from those customers. If you do not instruct your broker on how to vote your shares:

 

 

When brokers, banks or other nominees vote a customer’s shares on some but not all of the proposals, the missing votes are referred to in this proxy statement as broker non-votes and will be treated as present at the meeting for purposes of determining whether a quorum is present.

Proxies without Instructions.   Signed proxy cards returned by stockholders of record that do not contain voting instructions will be voted:

 

 

Voting by Micrus’s Directors and Executive Officers.   On the record date for the annual meeting, the directors and executive officers of Micrus and their controlled affiliates beneficially owned and were entitled to vote [ l ] outstanding shares of Micrus common stock, representing [ l ]% of the shares of Micrus common stock issued and outstanding on that date. To Micrus’s knowledge, these directors and executive officers intend to vote their shares in favor of the proposal to adopt the merger agreement.

 

The principal purpose of the merger is to enable Parent to acquire all of the outstanding shares of Micrus common stock and to provide Micrus stockholders with the opportunity to receive a cash payment for their shares at a premium over the recent market prices at which Micrus common stock traded before the public announcement of the merger agreement. If the merger is completed, each share of Micrus common stock will be converted into the right to receive $23.40 in cash, without interest and less any applicable withholding taxes.

 

Following the completion of the merger, Micrus will become a subsidiary of Parent and Micrus common stock will be delisted from the NASDAQ Global Select Market, which is referred to in this proxy statement as the NASDAQ, will not be publicly traded and will be deregistered under the Securities Exchange Act of 1934, as amended, which is referred to in this proxy statement as the Exchange Act.

 

If the merger is not completed for any reason, Micrus stockholders and holders of Company stock options will not receive any payment from Parent for their shares or stock options. Instead, Micrus will remain a public company and shares of Micrus common stock will continue to be listed on the NASDAQ. If the merger is not completed, Micrus expects to continue to conduct its business in a manner similar to the manner in which it is presently conducted. In such event, the value of shares of Micrus common stock would continue to be subject to current risks and opportunities, including the various factors described in Micrus’s past filings with the SEC, such as the condition of the medical device industry and prevailing economic and market conditions.

 

If the merger is completed, each outstanding share of Micrus common stock (other than shares owned by Micrus as treasury stock, shares owned by Parent or Merger Sub and shares for which appraisal rights have been properly exercised and perfected under the DGCL) will be converted into the right to receive $23.40 in cash, without interest and less any applicable withholding taxes. You will receive the per share amount in respect of your shares of Micrus common stock after you remit your stock certificate(s) evidencing your shares of Micrus common stock in accordance with the instructions contained in a letter of transmittal to be sent to you promptly after completion of the merger, together with a properly completed and signed letter of transmittal and any other documentation required to be completed pursuant to the written instructions.

If you hold your shares in book-entry form — that is, without a stock certificate — unless you do not vote in favor of the merger and you properly perfect your appraisal rights under the DGCL, the paying agent will automatically send you the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes, in exchange for the cancellation of your shares of Micrus common stock after completion of the merger.

 

If your shares of Micrus common stock are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee as to how to surrender your “street name” shares and receive cash for those shares.

 

Each outstanding stock option to purchase shares of Micrus common stock, whether vested or unvested, will be accelerated in full, and at the effective time of the merger, cancelled and each such option that has a per share exercise price lower than the per share merger consideration will be automatically converted into the right to receive an amount in cash per share subject to the stock option equal to the excess of the per share merger consideration of $23.40 over the per share exercise price of such stock option, without interest and less any applicable withholding taxes.

 

The Company’s 2005 Employee Stock Purchase Plan will continue to be operated in accordance with its terms and past practice for the current purchase period and will be terminated as of the closing date of the merger. If the closing of the merger is expected to occur prior to the end of the current purchase period, the Company will take action to provide for an earlier purchase date in accordance with the 2005 Employee Stock Purchase Plan.

 

The receipt of cash by a U.S. holder (as defined under “The Merger — Material U.S. Federal Income Tax Consequences”) pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes and such U.S. holder generally will recognize capital gain or loss equal to the difference between the cash that the U.S. holder is entitled to receive pursuant to the merger and the U.S. holder’s adjusted tax basis in the Micrus common stock surrendered. A non-U.S. holder (as defined under “The Merger — Material U.S. Federal Income Tax Consequences”) generally will not be subject to U.S. federal income tax on gain realized on the receipt of cash pursuant to the merger provided that (1) the gain is not effectively connected with the conduct of a trade or business by such non-U.S. holder in the United States and (2) in the case of a non-U.S. holder that is an individual, such non-U.S. holder is not present in the United States for 183 days or more in the taxable year of the disposition.

 

Because individual circumstances may differ, you are urged to consult your own tax advisor to determine the particular tax effects to you of the completion of the merger.

 

The Micrus board of directors has unanimously determined that the merger agreement and the merger are fair to, and in the best interests of, Micrus and its stockholders, and has unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement. The Micrus board of directors unanimously recommends that Micrus stockholders vote “FOR” the proposal to adopt the merger agreement.

 

The merger is subject to certain antitrust laws. Micrus and Parent have made filings under applicable antitrust laws with the United States Department of Justice and the United States Federal Trade Commission. Filings have also been made (or will be promptly made) with the relevant antitrust authorities in Austria, Italy,

Spain and the United Kingdom. Such governmental authorities could take action under applicable antitrust laws, including prohibiting the completion of the merger.

 

Micrus’s financial advisor, Lazard Frères & Co. LLC, which is referred to in this proxy statement as Lazard, delivered an opinion to the Micrus board of directors that, as of the date of the opinion and based upon and subject to the assumptions, procedures, factors, limitations and qualifications set forth therein, the per share merger consideration to be paid to holders of Micrus common stock (other than with respect to shares owned by Micrus as treasury stock, shares owned by Parent or Merger Sub and shares for which appraisal rights have been properly exercised and perfected under the DGCL) in the merger was fair, from a financial point of view, to the holders of Micrus common stock.

 

The full text of the written opinion of Lazard, dated July 10, 2010, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with its opinion, is attached to this proxy statement as Annex B. Lazard provided its opinion to the Micrus board of directors in connection with its evaluation of the merger. The Lazard opinion is not a recommendation as to how any holder of Micrus common stock should vote or act with respect to the merger or any matter relating thereto. We encourage you to read the opinion, which is attached to this proxy statement as Annex B, and the description thereof in the section titled “The Merger — Opinion of Financial Advisor” beginning on page 35 carefully and in their entirety.

 

The merger agreement includes representations, warranties and covenants made by the Company, Parent and Merger Sub as well as conditions to the closing of the merger. A copy of the merger agreement is attached to this proxy statement as Annex A. You are encouraged to carefully read the merger agreement as it is the legal document that contains the terms and conditions of the merger.

 

The merger agreement contains restrictions on Micrus’s ability to solicit or engage in discussions or negotiations with a third party regarding an acquisition proposal as described in “The Merger Agreement — No Solicitation by Micrus.” Notwithstanding the restrictions, under certain limited circumstances, Micrus may respond to and negotiate an unsolicited acquisition proposal or terminate the merger agreement and enter into an acquisition agreement with respect to a superior proposal, subject to paying Parent a termination fee of $13,250,000.

 

The respective obligations of each of the parties to complete the merger are subject to the satisfaction or, to the extent permitted by law, waiver of the following conditions:

 

 

The obligations of Parent and Merger Sub to complete the merger are also subject to the satisfaction or, to the extent permitted by law, waiver of the following conditions:

 

 

 

The obligation of Micrus to complete the merger is also subject to the satisfaction or, to the extent permitted by law, waiver of the following conditions:

 

 

Micrus can give no assurance that all of the remaining conditions will be either satisfied or waived.

 

The merger agreement may be terminated under certain circumstances (with any termination by Parent also being an effective termination by Merger Sub), including the following:

 

 

 

 

 

 

 

Micrus has agreed to pay Parent a termination fee of $13,250,000 if the merger agreement is terminated under the following circumstances:

 

 

Parent has agreed to pay Micrus a termination fee of $10,000,000 if the merger agreement is terminated by either Parent or Micrus either:

 

 

and at the time of any such termination, in either case, all conditions to closing have been satisfied or waived other than those conditions relating to antitrust laws.

 

When considering the recommendation by the Micrus board of directors that the Micrus stockholders adopt the merger agreement, you should be aware that a number of Micrus’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of other Micrus stockholders. The Micrus board of directors was aware of these interests and considered them, among other matters, in unanimously approving and declaring advisable the merger agreement and the transactions contemplated by the merger agreement.

 

Such interests relate to, or arise from, among other things, (1) the accelerated vesting of stock options, and the cancellation of such awards in exchange for the right to receive cash, upon the completion of the merger; (2) the potential receipt of severance payments or retention payments by executive officers; (3) the continuation of certain compensation and benefits to employees of the Company and its subsidiaries who are primarily employed in the United States who remain in the employment of the surviving corporation for a period of twelve months following the closing of the merger, pursuant to the merger agreement; and (4) the fact that, with respect to pre-merger acts and omissions, Parent will and the surviving corporation will continue to provide indemnification, advancement of expenses and directors’ and officers’ insurance coverage to current and former directors and officers of the Company after the merger.

 

For a description of these interests see “The Merger — Interests of Micrus’s Directors and Executive Officers in the Merger.”

 

Parent has represented in the merger agreement that it has, and as of the closing will have, sufficient immediately available funds to pay when due the aggregate merger consideration and to pay when due all of its fees and expenses related to the transactions contemplated by the merger agreement. The receipt of

financing by Parent is not a condition to the obligations of either party to complete the merger under the terms of the merger agreement.

 

Under Section 262 of the Delaware General Corporation Law (referred to in this proxy statement as the DGCL), record holders of Micrus common stock who do not vote in favor of the adoption of the merger agreement and who properly assert their appraisal rights will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of, their shares of Micrus common stock if the merger is completed, in lieu of receiving the merger consideration. The relevant provisions of the DGCL are included as Annex C to this proxy statement. You are encouraged to read these provisions carefully and in their entirety. Moreover, due to the complexity of the procedures for exercising the right to seek appraisal, Micrus stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable DGCL provisions will result in loss of the right of appraisal. See “The Merger — Appraisal Rights.”

 

Shares of Micrus common stock are listed on the NASDAQ. For a description of the market price of Micrus common stock, see “Market Price Data and Dividend Information.”

 

Bank of New York Mellon, or another comparable institution, will act as the paying agent in connection with the merger. See “The Merger Agreement — Exchange of Stock Certificates.”

 

You can find more information about us in the periodic reports and other information that we file with the SEC. The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at http://www.sec.gov. For a more detailed description of the additional information available, see “Where You Can Find More Information.”

 

Micrus and Parent are working to complete the merger as expeditiously as practicable. However, they cannot predict the exact timing of the completion of the merger because it is subject to governmental and regulatory approvals and clearances and other conditions. See “The Merger Agreement — Conditions to Completion of the Merger.”

 

The following are some questions that you may have regarding the proposed merger and the other matters being considered at the annual meeting and brief answers to those questions. Micrus Endovascular Corporation urges you to carefully read the remainder of this proxy statement because the information in this section does not provide all the information that might be important to you with respect to the proposed merger and the other matters being considered at the annual meeting. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this proxy statement.

 

Q:  What matters will be considered at the annual meeting?

 

 

 

 

 

 

For a description of these interests, see “The Merger — Interests of Micrus’s Directors and Executive Officers in the Merger.”

 

 

 

In order to complete the merger, Micrus stockholders must adopt the merger agreement. The Micrus board of directors has unanimously determined that the merger agreement and the merger are fair to, and in the best interests of, Micrus and its stockholders, and has unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement.

 

This proxy statement contains important information about the proposed merger, the merger agreement and the annual meeting, which you should read carefully. The enclosed voting materials allow you to vote your shares without attending the annual meeting.

 

For a more complete description of the annual meeting, see “The Annual Meeting.”

 

 

 

Your vote is very important. You are encouraged to vote as soon as possible.

 

 

 

 

 

 

 

For a more complete description of what Micrus stockholders will receive in the merger, see “The Merger Agreement — Merger Consideration.”

 

 

 

If you hold your shares in book-entry form — that is, without a stock certificate — unless you do not vote in favor of the merger and you properly perfect your appraisal rights under Delaware law, the paying agent will automatically send you the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes, in exchange for the cancellation of your shares of Micrus common stock after completion of the merger.

 

If your shares of Micrus common stock are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee on how to surrender your “street name” shares and receive cash for those shares.

 

 

 

Please do not send in your Micrus common stock certificates with your proxy card.

 

 

 

 

 

 

 

 

 

 

 

In addition to the antitrust regulatory clearances described above, clearances from other governmental agencies are required prior to the completion of the merger. Filings have been made (or will be promptly made) with the relevant antitrust authorities in Austria, Italy, Spain and the United Kingdom. Such

governmental authorities could take action under applicable antitrust laws, including prohibiting the completion of the merger.

 

For more information on the governmental and regulatory approvals required for completion of the merger, see “The Merger — Regulatory Matters.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internet.   You may vote by proxy over the Internet by going to the web address http://www.proxyvote.com and following the instructions for Internet voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

Telephone.   You may vote by proxy by telephone by dialing 1-800-690-6903 and following the instructions for telephone voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

Mail.   You may vote by proxy by completing, signing, dating and returning the enclosed proxy card in the enclosed pre-addressed postage-paid envelope.

 

If your shares are held in “street name” for your account by a broker, bank or other nominee, please refer to your proxy card or the information forwarded by your broker, bank or other nominee to see which options are available to you.

 

 

 

 

 

 

 

If your shares are held in “street name,” you should contact your broker, bank or other nominee directly to change your vote.

 

 

 

 

 

The Altman Group, Inc.
1200 Wall Street West, 3rd Floor
Lyndhurst, NJ 07071
Call Toll Free: (877) 283-0325
All Others Call: (201) 806-7300

 

This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, with respect to the merger, Micrus’s anticipated financial performance, business prospects and plans, and similar matters, including, without limitation, under the headings “Summary Term Sheet,” “The Merger - Recommendation of the Micrus Board of Directors and Its Reasons for the Merger,” “The Merger — Financial Projections,” “The Merger — Recommendation of the Micrus Board of Directors and Its Reasons for the Merger,” “The Merger - Regulatory Matters,” “The Merger — Litigation Relating to the Merger.” Forward-looking statements are typically identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “estimate,” “predict,” “project,” “plan,” “believe,” “target,” “forecast,” “should,” “could,” “would,” “intends” and other words and terms of similar meaning.

 

Micrus cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and, subject to applicable law, Micrus assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. In addition to factors previously disclosed in Micrus’s documents filed with or furnished to the SEC, and those identified elsewhere in this proxy statement, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

 

 

The merger agreement contains customary representations and warranties of the Company, on the one hand, and of Parent and Merger Sub, on the other. These representations and warranties were made solely for purposes of the merger agreement and solely for the benefit of the parties to the merger agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of

the parties if those statements prove to be inaccurate; (ii) may have been qualified in the merger agreement by disclosures that were made to the other party in connection with the negotiation of the merger agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the merger agreement or such other date or dates as may be specified in the merger agreement.

MARKET PRICE DATA AND DIVIDEND INFORMATION

 

Micrus common stock is listed and traded on the NASDAQ under the symbol “MEND.” The following table sets forth, for the periods indicated, the high and low price per share of Micrus common stock as quoted on the NASDAQ:

 

 

The following table sets forth the closing sale price per share of Micrus common stock as quoted on the NASDAQ on July 9, 2010, the last trading day before the public announcement of the merger agreement, and [ l ], 2010, the latest practicable trading day before the date of this proxy statement.

 

 

Micrus has never paid any dividends on its common stock. It currently intends to retain earnings, if any, for use in its business. If the merger is completed, Micrus common stock will be delisted from the NASDAQ and Micrus common stock will be deregistered under the Exchange Act.

 

Micrus is furnishing this proxy statement to holders of Micrus common stock as part of the solicitation of proxies by the Micrus board of directors for use at the 2010 annual meeting of Micrus stockholders (referred to in this proxy statement as the annual meeting). This proxy statement and the enclosed form of proxy are first being mailed to Micrus stockholders on or about [ l ], 2010.

 

Micrus will hold its annual meeting on [ l ], 2010 at 9 a.m., Pacific Time, at [ l ].

 

You are receiving a proxy statement and proxy card from us because you owned shares of our common stock on [ l ], the record date. This proxy statement describes issues on which we would like you, as a stockholder, to vote. It also gives you information on these issues so that you can make an informed decision.

 

When you sign the proxy card, you appoint John T. Kilcoyne, our Chief Executive Officer, Carolyn M. Bruguera, our General Counsel, and Gordon T. Sangster, our Chief Financial Officer, as your representatives at the annual meeting. Either Mr. Kilcoyne, Ms. Bruguera or Mr. Sangster will vote your shares, as you have instructed them on the proxy card, at the annual meeting. This way, your shares will be voted whether or not you attend the annual meeting. Even if you plan to attend the annual meeting it is a good idea to complete, sign and return your proxy card or vote your shares by Internet or telephone in advance of the annual meeting just in case your plans change.

 

The purpose of the annual meeting is to take action upon the following:

 

 

Each of the proposals is independent, and is not contingent on adoption by Micrus stockholders of any of the other proposals.

 

Only holders of Micrus common stock as of the close of business on [ l ], 2010, the record date for the annual meeting, are entitled to vote at the annual meeting. Each record holder will have one vote at the annual meeting for each share of Micrus common stock held by that Micrus stockholder as of the close of business on the record date. On the record date, [ l ] shares of Micrus common stock were issued and outstanding and such shares were held by approximately [ l ] holders of record.

 

A quorum, which is a majority of the outstanding shares entitled to vote as of the record date, [ l ], 2010, must be present in person or by proxy in order to hold the annual meeting and to conduct business. Shares are counted as being present at the annual meeting if you vote in person at the annual meeting, over the Internet, by telephone or by submitting a properly executed proxy card. Abstentions are counted as present for the purpose of determining a quorum.

 

If you are a stockholder of record of Micrus common stock as of the record date, you may submit your vote on any or all of the matters being considered at the annual meeting in person or by proxy. You may vote by proxy in any of the following ways:

 

Voting by Mail.   You may vote by proxy by mail by completing, signing and dating the enclosed proxy card and returning it in the prepaid and addressed envelope enclosed with proxy materials delivered by mail, you are authorizing the individuals named on the proxy card (referred to in this proxy statement as proxies) to

vote your shares at the annual meeting in the manner you indicate. We encourage you to complete, sign, date and return the proxy card even if you plan to attend the annual meeting so that your shares will be voted if you are unable to attend the annual meeting. If you received more than one proxy card, it is an indication that your shares are held in multiple accounts. Please complete, sign, date and return all proxy cards to ensure that all of your shares are voted.

 

Voting by Telephone.   You may vote by proxy by telephone by dialing 1-800-690-6903 and following the instructions for telephone voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

Voting over the Internet.   You may vote by proxy over the Internet by going to the web address http://www.proxyvote.com and following the instructions for Internet voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

If your shares are held in “street name” for your account by a broker, bank or other nominee, please refer to your proxy card or the information forwarded by your broker, bank or other nominee to see which options are available to you.

 

If you plan to attend the annual meeting and vote in person, we will provide you with a ballot at the annual meeting. If your shares are held in “street name” for your account by a broker, bank or other nominee, if you wish to vote at the annual meeting, you will need to bring to the annual meeting a legal proxy from your broker, bank or other nominee authorizing you to vote such shares.

 

Although it is not currently expected, the annual meeting may be adjourned or postponed for the purpose of soliciting additional proxies for the adoption of the merger agreement. Any adjournment or postponement may be made without notice, other than by an announcement made at the annual meeting, and the record date will not change due to an adjournment or postponement unless the date of the adjourned meeting is more than 30 days after the date for which the meeting was originally noticed or the Micrus board of directors, in its discretion, establishes a new record date. In order for the annual meeting to be adjourned, if necessary or appropriate, to permit further solicitation of proxies for the adoption of the merger agreement, the proposal to approve the adjournment of the annual meeting must receive a majority of the votes affirmatively cast, provided that a quorum is present.

 

Any adjournment or postponement of the annual meeting for the purpose of soliciting additional proxies will allow Micrus stockholders who have already sent in their proxies to revoke them at any time prior to their use at the annual meeting as adjourned or postponed, provided that such revocation is in compliance with the instructions (including as to timing) set forth in “— Revocability of Proxies.”

 

The votes required and the method of calculation for the proposals to be considered at the annual meeting are as follows:

 

Proposal No. 1 — Adoption of Merger Agreement.   The approval and adoption of the merger agreement requires the affirmative vote of a majority of the outstanding stock entitled to vote. The approval and adoption of the merger agreement is a condition to the closing of the merger.

 

Proposal No. 2 — Election of Directors.   The two nominees receiving the highest number of votes, in person or by proxy, will be elected as directors. You may vote “FOR” the nominees for election as directors or you may “WITHHOLD” your vote with respect to one or more nominees. Each share of Micrus common stock you own entitles you to one vote. There is no cumulative voting with respect to the election of directors. If you return a proxy card that withholds your vote from the election of all directors, your shares will be counted as present for the purpose of determining a quorum.

 

Proposal No. 3 — Ratification of Appointment of Independent Registered Public Accounting Firm. Ratification of the appointment of PwC for the current fiscal year requires the affirmative vote of a

majority of the shares present at the annual meeting, in person or by proxy. Our 2011 fiscal year began on April 1, 2010 and will end on March 31, 2011.

 

Proposal No. 4 — Approval of Adjournment of the Annual Meeting to Solicit Additional Proxies for the Adoption of the Merger Agreement . Adjournment of the annual meeting to solicit additional proxies for the adoption of the merger agreement requires the affirmative vote of a majority of the shares present at the annual meeting, in person or by proxy.

 

If you return a proxy card that indicates an abstention from voting on any proposal, the shares represented will be counted as present for the purpose of determining a quorum and will have the same effect as votes “AGAINST” the proposal.

 

If you sign and return your proxy card without providing your voting instructions, your shares will be voted “FOR” the approval and adoption of the merger agreement, the two named nominees for directors, the ratification of the appointment of PwC as our independent registered public accounting firm for the current fiscal year and for the approval of the adjournment of the annual meeting for the purpose of obtaining additional votes, and in the discretion of the proxies as to other matters that may properly come before the annual meeting.

 

If your shares are held in street name and you do not instruct your broker on how to vote your shares, your brokerage firm may either leave your shares unvoted or vote your shares on routine matters. The ratification of PwC will be considered a routine matter. To the extent your brokerage firm votes your shares on your behalf, your shares will be counted as present for the purpose of determining a quorum.

 

On the record date for the annual meeting, the directors and executive officers of Micrus were entitled to vote [ l ] outstanding shares of Micrus common stock, representing [ l ]% of the shares of Micrus common stock issued and outstanding on that date. To Micrus’s knowledge, these directors and executive officers intend to vote their shares in favor of the proposal to approve and adopt the merger agreement.

 

Micrus stockholders of record as of the record date may vote their shares by attending the annual meeting and voting their shares of Micrus common stock in person, by completing, signing and dating the enclosed proxy card and mailing it in the enclosed postage-prepaid envelope or by submitting the proxy over the Internet or by telephone by following the instructions printed on the proxy card. Micrus stockholders who hold their shares through a broker, bank or other nominee must follow the instructions on the proxy form supplied by their broker, bank or other nominee, which may provide for voting over the Internet or by telephone.

 

All shares represented by properly executed proxies received in time for the annual meeting will be voted at the annual meeting in the manner specified by the holders of such shares.

 

Proxy cards returned without instructions but signed by stockholders of record will be voted:

 

 

Your vote is important. Please return your marked proxy card or submit your proxy over the Internet or by telephone so your shares can be represented, even if you plan to attend the annual meeting in person.

 

You may revoke your proxy at any time before it is voted at the annual meeting. To do this, you must:

 

 

If you hold your shares in “street name” and have instructed your broker, bank or other nominee to vote your shares, you should contact your broker, bank or other nominee directly to change your vote.

 

Micrus is furnishing this proxy statement to holders of Micrus common stock as part of the solicitation of proxies by the Micrus board of directors for use at the annual meeting. Micrus and its proxy solicitation firm, The Altman Group, may solicit proxies in person or by telephone, fax or other means. Micrus will pay The Altman Group a fee for its services of $8,500, plus customary administrative fees for expenses related to calls made to or received from our stockholders and will reimburse The Altman Group for reasonable out-of-pocket expenses. Micrus will also pay all other reasonable expenses for solicitation. In addition, proxies may be solicited by directors, officers and other employees of Micrus, without additional remuneration, in person or by telephone, fax or other means.

 

You should send in your proxy by mail or vote over the Internet or by telephone without delay. If you hold shares of Micrus common stock in “street name” through a broker, bank or other nominee, please follow the instructions on the proxy form supplied by your broker, bank or other nominee, which may provide for voting through the Internet or by telephone. Micrus will also reimburse brokers, banks and other nominees for their expenses in sending these materials to you and obtaining your voting instructions.

 

You should not send your stock certificate(s) evidencing your shares of Micrus common stock with your proxy. Promptly after completion of the merger, a letter of transmittal with written instructions for the surrender of stock certificates will be mailed to holders of shares of Micrus common stock. If you hold your shares in book-entry form — that is, without a stock certificate — the exchange agent will automatically send you the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes, in exchange for the cancellation of your shares of Micrus common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Micrus common stock are held in “street name” by your broker, bank or other nominee you will receive instructions from your broker, bank or other nominee as to how to surrender your “street name” shares and receive cash for those shares.

 

In a further effort to reduce printing costs and postage fees, we have adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our proxy materials, unless one or more of these stockholders notifies us that he or she wishes to continue receiving individual copies. Stockholders who participate in householding will continue to receive separate proxy cards.

 

If you share an address with another stockholder and received only one set of proxy materials and would like to request a separate copy of these materials, please: (1) mail your request to Micrus Endovascular

Corporation, 821 Fox Lane, San Jose, California 95131 Attn: Investor Relations, or (2) call our Investor Relations department at (408) 433-1400. Additional copies of the proxy materials will be sent promptly after receipt of your request. Similarly, you may also contact us if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future.

 

Micrus is not currently aware of any other business to be acted upon at the annual meeting. If, however, other matters are properly brought before the annual meeting, or any adjourned or postponed meeting, your proxies include discretionary authority on the part of the individuals appointed to vote your shares or act on those matters according to their best judgment.

 

Micrus Endovascular Corporation

 

Micrus is a Delaware corporation, incorporated in the State of Delaware in 1996, with its principal executive offices located at 821 Fox Lane, San Jose, California 95131. The telephone number of the Company is (408) 433-1400. The Company develops, manufactures and markets implantable and disposable medical devices for use in the treatment of cerebral vascular diseases. Micrus products are used by interventional neuroradiologists, interventional neurologists and endovascularly trained neurosurgeons to treat both cerebral aneurysms responsible for hemorrhagic stroke and intracranial atherosclerosis, which may lead to ischemic stroke. Hemorrhagic and ischemic stroke are both significant causes of death and disability worldwide.

 

Johnson & Johnson

 

Parent is a New Jersey corporation, incorporated in the State of New Jersey in 1887, with its principal executive offices located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. The telephone number of Parent is (732) 524-0400. The following description of Parent and its business is qualified in its entirety by reference to Parent’s Annual Report on Form 10-K for the fiscal year ended January 3, 2010. Parent and its subsidiaries have approximately 114,000 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. Parent is a holding company, which has more than 250 operating companies conducting business in virtually all countries of the world. Parent’s primary focus has been on products related to human health and well-being.

 

Cope Acquisition Corp.

 

Merger Sub is a Delaware corporation, incorporated in the State of Delaware in 2010, with its principal executive offices located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. The telephone number of Merger Sub is (732) 524-0400. Merger Sub is a wholly owned subsidiary of Parent. Merger Sub was formed solely for the purpose of engaging in the merger and the other transactions contemplated by the merger agreement and has not engaged, and does not expect to engage, in any other business activities.

PROPOSAL 1:

 

THE MERGER

 

The following is a description of the material aspects of the merger and is qualified in its entirety by the merger agreement, a copy of which is attached to this proxy statement as Annex A. While Micrus believes that the following description addresses the material terms of the merger, the description may not contain all of the information that is important to you. Micrus encourages you to carefully read this entire proxy statement, including the merger agreement, which is attached as Annex A to this proxy statement, for a more complete understanding of the merger.

 

The Company’s management periodically reviews and assesses trends and conditions in our business and regularly updates the Micrus board of directors on these matters. From time to time, our management also reviews with the Micrus board of directors strategic options potentially available to the Company.

 

From June through November 2008, the Company engaged in preliminary discussions with a number of strategic buyers regarding a potential sale of the Company which resulted in preliminary proposals from two publicly-traded companies (referred to in this proxy statement as Company A and Company B) to acquire the Company for between $20 and $23 per share, in the case of Company A, and $21.25 per share, in the case of Company B, each in cash and subject to entry into by the Company of an exclusivity agreement, completion of due diligence and certain other terms and conditions. The Micrus board of directors subsequently authorized the Company to engage in exclusive discussions with Company A. After conducting due diligence, Company A revised its preliminary proposal to $18 per share in cash. The Micrus board of directors determined that it was in the best interests of the Company and its stockholders to continue to operate as an independent company and not to proactively seek further negotiations with potential acquirers at that time in light of declining conditions in the equity capital markets generally.

 

The Company did engage in preliminary discussions with Parent, and in particular with representatives of Codman & Shurtleff, Inc. (referred to in this proxy statement as Codman), the neuro device business of the DePuy Family of Companies within Parent and a subsidiary of Parent, regarding a potential acquisition of the Company as part of the discussions that occurred from June through November 2008. However, these preliminary discussions were not substantive in nature and Parent did not make any proposal for an acquisition transaction during the course of these discussions.

 

In early March 2009, a public company (referred to in this proxy statement as Company C) inquired as to whether Micrus would have any interest in being acquired by Company C. Company C subsequently withdrew its interest without any substantive discussions occurring between the parties because it did not believe that it could offer a price which would be acceptable to the Micrus stockholders. Micrus’s stock was trading at approximately $6 per share at that time.

 

On April 21, 2009, the Micrus board of directors held a regular meeting. In addition to providing an overview as to the Company’s business and operations, the Company’s management updated the Micrus board of directors on potential opportunities for strategic transactions.

 

At industry conferences in May and June 2009, John Kilcoyne, our Chief Executive Officer, and Robert A. Stern, our Chief Operating Officer, had preliminary conversations with representatives of Codman regarding a potential acquisition of the Company by Parent. These preliminary conversations were limited to a discussion of whether Codman would be interested in engaging in further discussions with the Company about a potential acquisition, but did not include a substantive discussion of the terms of such an acquisition or any offer to acquire the Company.

 

At an industry conference in early July 2009, Mr. Stern met with a representative of Codman to continue the parties’ preliminary discussions regarding a potential acquisition of the Company by Parent. These preliminary discussions were limited to a continuation of the prior conversations between representatives of the Company and Codman concerning Codman’s interest in engaging in further discussions with the Company about a potential acquisition, but the substantive terms of any such acquisition were not discussed, nor was an offer to acquire the Company made.

 

On July 14, 2009, the Micrus board of directors held a regular meeting. In addition to providing an overview as to the Company’s business and operations, the Company’s management reported to the Micrus board of directors on the status of discussions regarding potential strategic transactions involving the Company, including the preliminary discussions that had occurred with Codman regarding a potential acquisition of the Company by Parent.

 

On September 15, 2009, the Micrus board of directors held a regular meeting. In addition to providing an overview as to the Company’s business and operations, management reported to the Micrus board of directors

that there had not been further discussions with Codman regarding a potential acquisition of the Company by Parent since July 2009.

 

In late September 2009, Mr. Stern contacted a representative of Codman to follow up on the parties’ July discussions. Codman indicated that it would respond to the Company later in the fall of 2009 if Parent had any interest in a potential acquisition.

 

On November 10, 2009, the Micrus board of directors held a regular meeting. In addition to providing an overview of the Company’s business and operations, management updated the Micrus board of directors on the status of discussions regarding potential strategic transactions involving the Company, including with respect to a potential acquisition of the Company, and communicated the fact that they had not heard anything further from Codman. The Micrus board of directors discussed the fact that Company A had entered into exclusive negotiations with the Company which had terminated in the fall of 2008 in the face of deteriorating stock market conditions. The Micrus board of directors recommended that Mr. Kilcoyne contact Company A to ascertain whether it had any interest in an acquisition of the Company at a higher price than Company A’s 2008 proposal.

 

In mid November 2009, Mr. Kilcoyne contacted Company A to ascertain whether it had any interest in an acquisition of the Company at a higher price than Company A’s 2008 proposal. Company A stated that although it remained interested in the Company, if the parties were to engage in discussions it would probably be at a lower purchase price than its 2008 proposal. Also in mid November 2009, Mr. Kilcoyne met with representatives of Company D and Codman at a conference and believed as a result of these meetings that neither Company D nor Codman was interested in pursuing a transaction at that time.

 

On November 23, 2009, the Micrus board of directors held a regular meeting. In addition to providing an overview of the Company’s business and operations, management updated the Micrus board of directors on Mr. Kilcoyne’s conversations with Company A, Company D and Codman. The Micrus board of directors discussed Company A’s response and decided that it was not in the best interests of the Company or its stockholders to reengage in discussions with Company A at that time.

 

On February 9, 2010, Mr. Kilcoyne received a message from a publicly-traded company (referred to in this proxy statement as Company D) requesting to speak to him regarding a potential transaction.

 

On February 10, 2010, Mr. Kilcoyne, Mr. Stern and Gordon Sangster, our Chief Financial Officer, had a conversation with executives from Company D in which Company D expressed an interest in a potential acquisition of the Company at a preliminary range of $22 to $24 per share in cash, subject to completion of due diligence and certain terms and conditions. Mr. Kilcoyne responded that he would call a meeting of the Micrus board of directors to report on Company D’s proposal and to assess the Company’s interest in proceeding with discussions.

 

On February 12, 2010, in light of the interest shown by Company D, Mr. Kilcoyne contacted Company A to gauge its interest in a potential acquisition of the Company. Company A indicated that it would call back the following week to let the Company know whether it would be interested in discussing a potential acquisition.

 

On February 12, 2010, the Micrus board of directors held a special telephonic meeting, with representatives of the Company’s management present, to discuss Company D’s proposal and the engagement of a financial advisor and outside legal counsel in connection with an exploration of the Company’s strategic alternatives. The Micrus board of directors directed management to retain Lazard Frères & Co. LLC (referred to in this proxy statement as Lazard) as the Company’s financial advisor. The Micrus board of directors directed management to work with Lazard to identify other prospective parties who should be contacted regarding a strategic transaction with the Company.

 

On February 16, 2010, Mr. Kilcoyne communicated with Company D regarding Company D’s availability to proceed with discussions.

 

Also on February 16, 2010, Company A contacted Mr. Kilcoyne and indicated that it would be interested in discussing a potential acquisition of the Company.

On February 18, 2010, Mr. Kilcoyne contacted Company A and Company D and relayed that the Micrus board of directors had provided preliminary approval to proceed with discussions and that Lazard would be representing the Company as its financial advisor.

 

On February 18, 2010, representatives of Lazard contacted Company A to discuss a framework for due diligence and sent a copy of a proposed confidentiality agreement to Company A. Lazard left a message with Company D requesting a conversation to discuss the due diligence process. Based on the companies who had previously expressed interest in a potential acquisition of the Company, Lazard and management discussed several prospective parties who should be contacted and identified other potential buyers that likely would be interested in, and able to consummate, a potential acquisition of the Company. Lazard and management also discussed whether to reach out to Company C. In light of regulatory risk perceived in consummating a merger with Company C and Company C’s reluctance less than a year ago to pay close to the price range being discussed by Company D, Micrus decided not to reach out to Company C. Lazard recommended contacting companies active in the medical device industry and recommended against contacting financial buyers, as Lazard believed financial buyers would not be able to match the price paid by a strategic buyer because, among other factors, Micrus lacked meaningful cash flow to support the type of leverage a financial buyer would seek in a transaction and financial buyers would not be able to generate value from synergies like a strategic buyer. Also on February 18, 2010, Lazard contacted four additional strategic buyers identified by management and Lazard as both likely to be interested in, and likely to be able to consummate, a potential acquisition of the Company, which included Company B and Parent (the two other strategic buyers, each a publicly-traded company, are referred to in this proxy statement as Company E and Company F). Mr. Kilcoyne and Mr. Stern also called Codman to assess its interest in a potential acquisition of the Company. Company B, Company E and Company F indicated that they would be interested in participating in discussions with the Company about a potential acquisition. Copies of proposed confidentiality agreements were sent to Company E and Company F. Codman indicated that it would discuss the matter and revert with a response on behalf of Parent.

 

On February 19, 2010, Company D contacted Lazard to discuss the due diligence process and copies of proposed confidentiality agreements were sent to Company B and Company D.

 

On February 19, 2010, Mr. Kilcoyne updated the Micrus board of directors regarding the parties the Company had elected to contact to solicit interest in a potential acquisition of the Company and the status of discussions with the various parties and the due diligence process that was to commence upon execution of confidentiality agreements.

 

On February 23, 2010, the Company executed a confidentiality agreement with Company D.

 

Also on February 23, 2010, Lazard contacted Codman about the interest of Parent in a potential acquisition of the Company. Codman indicated that it would respond in two days.

 

On February 25, 2010 representatives of a publicly-traded company (referred to in this proxy statement as Company G) contacted Lazard to convey Company G’s interest in participating in discussions with the Company about a potential acquisition. On February 25, 2010, Codman contacted Mr. Kilcoyne to express its interest in participating in discussions with the Company about a potential acquisition by Parent. Codman indicated to Mr. Kilcoyne that its representatives would be participating in these discussions on behalf of Parent.

 

On February 26, 2010, the Company executed confidentiality agreements with Company A and Company B. On February 26, 2010, Lazard contacted Codman to discuss the due diligence process and sent a copy of a proposed confidentiality agreement to Codman.

 

On March 1, 2010, the Company executed an engagement letter with Lazard.

 

On March 2, 2010, the Company executed a confidentiality agreement with Codman.

 

On March 4, 2010, the Company executed a confidentiality agreement with Company E. Company G also contacted Lazard to discuss the due diligence process.

 

On March 5, 2010, the Company executed a confidentiality agreement with Company F.

On March 8, 2010, Company G and representatives from its financial advisor contacted Lazard and expressed an interest in a potential acquisition of the Company at a preliminary range of $23 to $25 per share in cash, subject to completion of due diligence, a financing condition and certain other terms and conditions.

 

On March 9, 2010, a copy of a proposed confidentiality agreement was sent to Company G.

 

On March 12, 2010, the Company executed a confidentiality agreement with Company G.

 

During March and April 2010, the Company established an electronic data room, held management presentations and telephone conferences and conducted site visits with representatives of Company A, Company B, Company D, Company E, Company F, Company G and Codman to discuss and provide information regarding our business and financial position, various strategic opportunities, customer relationships, intellectual property and other assets and to respond to other due diligence inquiries.

 

On March 19, 2010, Lazard distributed bid process letters to each of Company A, Company B, Company D, Company E, Company F, Company G and Codman, soliciting final binding written proposals by April 13, 2010. Each bidder was instructed to complete its due diligence and provide a mark-up of the merger agreement that accompanied the bid process letters by the final bid date.

 

On March 22, 2010, Lazard received a message from a publicly-traded company (referred to in this proxy statement as Company H) expressing an interest in potentially pursuing an acquisition of the Company and inquiring about the due diligence process.

 

On March 23, 2010, the Micrus board of directors held a special telephonic meeting, with representatives of the Company’s management, Skadden, Arps, Slate, Meagher & Flom LLP, the Company’s outside counsel (referred to in this proxy statement as Skadden Arps), and Lazard present, to discuss the status of the process with the various interested parties. Also on March 23, 2010, Lazard contacted Company H to assess whether it was still interested in potentially pursuing an acquisition of the Company. Company H subsequently declined to participate in discussions with the Company about a potential acquisition.

 

On March 26, 2010, Company A formally withdrew from the process.

 

On March 30, 2010, Company E formally withdrew from the process and Lazard circulated revised bid process letters with a final bid date of April 16, 2010 and a draft of the proposed acquisition agreement to Company B, Company D, Company F, Company G and Parent. On March 31, 2010, Lazard circulated draft disclosure schedules to Company B, Company D, Company F, Company G and Parent.

 

On April 4, 2010, Company F formally withdrew from the process.

 

On April 9, 2010, Company D formally withdrew from the process.

 

On April 12, 2010, Company B formally withdrew from the process.

 

On April 16, 2010, Parent, through Codman, submitted a non-binding offer to acquire the Company for $25.28 per share in cash and outlining the terms and conditions under which Parent would be prepared to acquire the Company. Parent, through Codman, also submitted a markup prepared by Parent’s counsel, Cravath, Swaine & Moore LLP, reflecting their proposed revisions to the draft acquisition agreement that had been provided by the Company. Also on April 16, 2010, Company G submitted a non-binding offer to acquire the Company for $23.50 per share in Company G stock, outlining certain significant terms and conditions under which Company G would be prepared to acquire the Company. Company G did not submit a mark-up of the acquisition agreement that had been provided by the Company and its proposal was subject to the completion of further due diligence.

 

On April 19, 2010, the Micrus board of directors held a special telephonic meeting, with representatives from management, Skadden Arps and Lazard present, to discuss the process and the Parent and Company G proposals. Lazard summarized for the board of directors the process to date, including the withdrawal from the process of Company A, Company B, Company D, Company E and Company F. Lazard and Skadden Arps summarized the key terms of the Parent and Company G proposals. Lazard discussed with the Micrus board of directors certain financial aspects of the Parent and Company G proposals. Skadden Arps advised the Micrus

board of directors on its fiduciary duties to the Company and its stockholders. The Micrus board of directors also considered the Company’s historical and projected financial performance. After full discussion, and without accepting the Parent proposal, the Micrus board of directors approved continued negotiation of a definitive agreement with Parent. The Micrus board of directors also directed Lazard to contact Company G to let it know that it was not the highest bidder so that it would have an opportunity to increase its bid.

 

From April 19, 2010 to April 28, 2010, representatives of the Company and Parent had frequent discussions regarding finalizing the merger agreement and the related documents, and Parent continued to conduct confirmatory due diligence.

 

On April 20, 2010, Lazard informed Company G that it was not the highest bidder. Company G declined to raise its bid, but indicated that the Company should come back to it if the Company did not consummate a transaction with the highest bidder.

 

On April 27, 2010, Micrus was informed of the preliminary results of its Cerecyte coil trial. The Cerecyte coil trial is a 500 patient randomized study comparing results of coiling with Micrus Cerecyte microcoils against Micrus bare platinum microcoils. The data demonstrated that, based on the core lab assessment of angiographic success, the Micrus Cerecyte and Micrus bare platinum groups are superior to those of the International Subarachnoid Aneurysm Trial (referred to in this proxy statement as ISAT), and that the safety outcomes for Micrus Cerecyte and Micrus bare platinum coils are also superior to the coiling results reported in the ISAT, as well as all other published randomized data. However, Micrus learned that due to the strong performance of Micrus bare platinum coils, it was unlikely that the data will demonstrate a statistically significant difference in angiographic outcome between the Micrus Cerecyte microcoils and the Micrus bare platinum microcoils. Also on April 27, 2010, Company C contacted Lazard to inquire if Micrus was engaged in a sale process. Lazard subsequently confirmed to Company C that Micrus was engaged in a sale process.

 

On April 28, 2010, Mr. Kilcoyne discussed the preliminary results of the Company’s Cerecyte coil trial with Codman. Parent subsequently withdrew its proposal and indicated that it would need an opportunity to analyze the preliminary results of the Cerecyte coil trial to understand the impact of the preliminary results on its view of the Company’s business.

 

On April 29, 2010, the Micrus board of directors held a special telephonic meeting, with representatives from management, Skadden Arps and Lazard present, to discuss the status of the Company’s efforts to solicit interest in a potential acquisition of the Company. Mr. Kilcoyne updated the Micrus board of directors on the preliminary Cerecyte coil trial data and Parent’s withdrawal of its proposal. Lazard updated the Micrus board of directors on its conversations with Parent and its April 20, 2010 conversation with Company G.

 

On April 29, 2010, at the direction of the Micrus board of directors, Lazard contacted Company A, which had previously indicated that it might reconsider its interest in a potential acquisition once the results of the Company’s Cerecyte coil trial were available, to assess its interest in reengaging in discussions. Company A indicated an interest in revisiting a potential acquisition.

 

On May 2, 2010, the Company had a conference call with Codman to discuss the preliminary results of the Company’s Cerecyte coil trial.

 

On May 5, 2010, Company A submitted a list of follow-up due diligence questions to which the Company subsequently responded.

 

On May 6, 2010, the Company held an earnings call during which it disclosed the preliminary results of the Company’s Cerecyte coil trial.

 

On May 11, 2010, the Micrus board of directors held a special telephonic meeting, with representatives from management, Skadden Arps and Lazard present, to discuss the status of the Company’s efforts to solicit interest in a potential acquisition of the Company. At this meeting, the Micrus board of directors considered the fact that the process had been continuing since February of 2010 and that a transaction committee could be formed to streamline the process by charging specific board members with oversight of the process. The Micrus board of directors approved the formation of such a transaction committee (referred to in this proxy

statement as the Transaction Committee), granting it the authority to review and evaluate, oversee negotiations with respect to, and make recommendations to the Micrus board of directors with respect to, potential transactions involving the possible sale or merger of the Company or a substantial portion of its businesses or assets. The Micrus board designated Michael L. Eagle, L. Nelson Hopkins, M.D., Mr. Kilcoyne and Jeffrey H. Thiel as its members.

 

On May 13, 2010, Codman submitted a list of follow-up due diligence questions that the Company subsequently responded to. Also on May 13, 2010, Lazard spoke with Company G to schedule a call between Company G and the Transaction Committee for May 19, 2010.

 

On May 19, 2010, the Transaction Committee had a conference call with Company G to discuss a potential acquisition of the Company.

 

Also on May 19, 2010, the Company had a conference call with Company A to discuss the preliminary results of the Company’s Cerecyte coil trial.

 

On May 20, 2010, the preliminary results of the Company’s Cerecyte coil trial were presented at the American Society of Neuroradiology’s 48th Annual Meeting.

 

On May 21, 2010, the Transaction Committee held a telephonic meeting to discuss the status of the discussions with, and diligence review undertaken by, the various parties.

 

On May 26, 2010, Lazard met with Company C to discuss topics unrelated to Micrus. During the meeting, Company C inquired if Micrus was still engaged in a sale process. Lazard subsequently confirmed to Company C that Micrus was still engaged in a sale process. Company C did not pursue the matter further.

 

On June 1, 2010, Lazard contacted Company D to assess its interest in reengaging in discussions because Lazard believed that it might have renewed interest in a potential acquisition of Micrus.

 

On June 7, 2010, Company H contacted Lazard regarding whether the Company was considering proposals for the acquisition of the Company.

 

On June 10, 2010, Lazard contacted Company H to assess its interest in engaging in discussions regarding a potential acquisition of the Company. Company H subsequently indicated that it was not interested in pursuing an acquisition of the Company at that time.

 

During the week of June 14, 2010, Company D and Company G indicated that they were not interested in reconsidering an acquisition of the Company at that time.

 

On June 16, 2010, Parent, through Codman, submitted a non-binding offer to acquire the Company for $22.84 per share in cash. In submitting this revised offer, Codman cited its view that the preliminary results of the Cerecyte coil trial had resulted in Parent adjusting its valuation of the Company.

 

On June 22, 2010, Company A indicated that it was not interested in reconsidering an acquisition of the Company at that time.

 

On June 23, 2010, the Company and Lazard responded to Parent with a counterproposal of $24.00 per share in cash.

 

On June 30, 2010, Parent, through Codman, submitted a non-binding proposal to acquire the Company for $23.40 per share in cash, which it indicated was its highest and final offer.

 

On June 30, 2010, the Micrus board of directors held a special telephonic meeting, with representatives from management, Skadden Arps and Lazard present, to discuss the efforts undertaken by the Company to solicit interest in a possible acquisition and the Parent proposal. Lazard summarized for the board of directors the process to date, including the responses from Company A and Company D that they were not interested in reconsidering an acquisition of the Company at that time, Company E’s response that it was not interested in acquiring the Company, the absence of any further indications of interest from Company B and Company F and Parent’s indication that its proposal to acquire the Company for $23.40 per share in cash was its highest

and final offer. Skadden Arps advised the Micrus board of directors on its fiduciary duties to the Company and its stockholders. The Micrus board of directors also considered the Company’s historical and projected financial performance and the risks and prospects of continuing to operate independently. After full discussion, and without accepting the Parent proposal, the Micrus board of directors approved reengagement in negotiations with Parent with the understanding of Parent’s highest price being $23.40.

 

From June 30, 2010 to July 10, 2010, representatives of the Company and Parent had discussions regarding finalizing the merger agreement and the related documents, and Parent continued to conduct due diligence. From July 8, 2010 to July 10, 2010, representatives of the Company and Parent negotiated the terms of the Severance Agreements and the Retention Agreements. Entry into the Retention Agreements was a condition to the willingness of Parent and Merger Sub to enter into the merger agreement. Management had not been permitted to engage in negotiations regarding the Retention Agreements until July 8, 2010, after negotiation of the material terms of the merger agreement, including the purchase price, had concluded.

 

On July 9, 2010, the Micrus board of directors held a special telephonic meeting, with representatives from management, Skadden Arps and Lazard present, to discuss the status of efforts undertaken by the Company to solicit interest in a possible acquisition and the Parent proposal. The Micrus board of directors discussed the risks and benefits of continuing as an independent entity. At this meeting, Skadden Arps advised the Micrus board of directors of its fiduciary duties to the Company and its stockholders. Skadden Arps also reviewed the current status of the terms and conditions of the merger agreement with the Micrus board of directors, the negotiations with respect to which were substantially complete. Also at this meeting, Lazard reviewed certain financial information and analyses with respect to the proposed transaction with Parent with the Micrus board of directors and reported that it and the Company’s management had engaged in extensive discussions with various other potential acquirers, but Parent was the only interested potential acquirer that expressed interest in acquiring the Company. The Micrus board of directors decided not to approve the merger agreement until all terms and conditions were finalized, including in particular the calculation of the termination fee payable by the Company. Further, it was noted that Parent needed to complete limited confirmatory due diligence. In that regard, the Micrus board of directors agreed to reconvene once the foregoing matters were complete and directed management to negotiate the lowest possible termination fee to which Parent would agree.

 

From July 9 through July 10, 2010, Parent completed its confirmatory due diligence and representatives of Parent and the Company finalized all terms of the merger agreement, including the calculation of the termination fee, which calculation resulted in a lower termination fee than Parent had previously requested.

 

On July 10, 2010, the Micrus board of directors held a special telephonic meeting, with representatives from management, Skadden Arps and Lazard present, to review the proposed transaction with Parent. Skadden Arps again advised the Micrus board of directors on its fiduciary duties to the Company and its stockholders. Skadden Arps reviewed the final terms of the merger agreement and the severance agreements and retention agreements, copies of which previously had been distributed to the Micrus board of directors. Also at this meeting, Lazard reviewed with the Micrus board of directors its financial analysis of the $23.40 per share cash consideration to be paid to holders of Micrus common stock and rendered to the Micrus board of directors an oral opinion, which was confirmed by delivery of a written opinion dated July 10, 2010, to the effect that, as of that date and based upon and subject to the assumptions, procedures, factors, limitations and qualification set forth in its opinion, the consideration to be paid to holders of Micrus common stock (other than with respect to shares owned by Micrus as treasury stock, shares owned by Parent or Merger Sub and shares for which appraisal rights have been properly exercised and perfected under the DGCL) in the transaction is fair, from a financial point of view, to such holders. The Micrus board of directors discussed the possibility and related consequences of rejecting Parent’s proposal and the risks and benefits of continuing as an independent entity. After discussion, the Micrus board of directors determined that it was in the best interest of the Company and its stockholders to proceed with the proposed transaction with Parent. The Compensation Committee, by unanimous approval of all members after discussion in the absence of management, approved the Severance Agreements and the Retention Agreements. The Micrus board of directors, by unanimous approval of all members, then approved the merger, the merger agreement and related transactions with Parent and instructed management to exchange signature pages to the merger agreement with Parent.

On July 11, 2010, Micrus executed the merger agreement with Parent and Merger Sub.

 

Before market open on Monday, July 12, 2010, Parent and the Company jointly announced the execution of the merger agreement. During the pendency of the merger, the Company and its representatives and Parent, Merger Sub and their representatives intend to have ongoing contacts.

 

 

The principal purposes of the merger are to enable Parent to acquire all of the outstanding shares of Micrus common stock and to provide Micrus stockholders with the opportunity to receive a cash payment for their shares at a premium over the recent market prices at which Micrus common stock traded before the public announcement of the merger agreement. The acquisition will be accomplished by a merger of Merger Sub with and into Micrus, with Micrus continuing as the surviving corporation and as a subsidiary of Parent. If the merger is completed, each outstanding share of Micrus common stock (other than shares owned by Micrus as treasury stock, shares owned by Parent or Merger Sub and shares for which appraisal rights have been properly exercised and perfected under the DGCL) will be converted into the right to receive $23.40 in cash, without interest and less any applicable withholding taxes.

 

Subject to consummation of the merger, immediately prior to the effective time of the merger, each outstanding option to purchase shares of Micrus common stock, whether or not vested or exercisable, will be accelerated in full, and at the effective time of the merger, each outstanding option will be cancelled and each such option that has a per share exercise price lower than the per share merger consideration will be automatically converted into the right to receive an amount in cash, without interest and less any applicable withholding taxes, equal to the product obtained by multiplying (x) the number of shares of common stock that would have been issuable upon exercise of such option immediately prior to the effective time of the merger and (y) the excess of $23.40 over the per share exercise price of such Company stock option.

 

You will receive the per share merger consideration after you remit your certificate(s) evidencing your shares of Micrus common stock in accordance with the instructions contained in a letter of transmittal to be sent to you promptly after completion of the merger, together with the properly completed and signed letter of transmittal and any other documentation required to be completed pursuant to the written instructions. If you hold your shares in book-entry form — that is, without a stock certificate — unless you do not vote in favor of the merger and you perfect your appraisal rights under the DGCL, the paying agent will automatically send you the per share merger consideration in cash in exchange for the cancellation of your shares of Micrus common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Micrus common stock are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee as to how to surrender your “street name” shares and receive cash for those shares.

 

The merger will terminate all interests in Micrus common stock held by the Micrus stockholders, Micrus will become a subsidiary of Parent and Parent will be the sole beneficiary of any earnings and growth of Micrus following the merger. Upon completion of the merger, Micrus common stock will be delisted from the NASDAQ, will no longer be publicly traded and will be deregistered under the Exchange Act.

 

 

If the merger is not completed for any reason, Micrus stockholders and holders of Company stock options will not receive any payment from Parent for their shares or stock options. Instead, Micrus will remain a public company and shares of Micrus common stock will continue to be listed on the NASDAQ. If the merger is not completed, Micrus expects to continue to conduct its business in a manner similar to the manner in which it is presently conducted. In such event, the value of shares of Micrus common stock would continue to be subject to current risks and opportunities, including the various factors described in Micrus’s past filings with the SEC, such as prevailing economic and market conditions.

 

If the merger is not completed, Micrus common stock may trade at pre-announcement levels or below due to adverse market reaction. If the merger is not completed, there can be no assurance that any other transaction similar to the merger would be available to Micrus. Even if such a transaction were available, there

can be no assurance that such transaction would be acceptable to the Micrus board of directors and would offer Micrus stockholders the opportunity to receive a cash payment for their shares of Micrus common stock at a premium over the recent market prices at which Micrus common stock traded before the public announcement of any such transaction.

 

Finally, if the merger agreement is terminated under certain circumstances, Micrus may be obligated to pay a termination fee of $13,250,000 or Parent may be obligated to pay a termination fee of $10,000,000, see “The Merger Agreement — Termination Fees.”

 

 

After careful consideration, the Micrus board of directors has unanimously determined that the merger agreement and the merger are fair to, and in the best interests of, Micrus and its stockholders. Accordingly, the Micrus board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement. The Micrus board of directors unanimously recommends that Micrus stockholders vote “FOR” the proposal to approve and adopt the merger agreement. In making this determination, the Micrus board of directors consulted with Micrus’s senior management, its financial advisor and its outside legal counsel and considered a number of factors that supported its unanimous decision to approve the merger agreement and the transactions contemplated by the merger agreement, including, without limitation, the following:

 

 

 

 

 

In making its recommendation, the Micrus board of directors was aware of and took into consideration the interests of certain Company executives, including the Chief Executive Officer, who is a member of the Micrus board of directors, in the merger as a result of the agreements referred to “— Interests of Micrus’s Directors and Executive Officers in the Merger” and their holding of Micrus common stock and Company stock options.

 

The foregoing discussion of information and factors considered by the Micrus board of directors is not intended to be exhaustive, but is believed to include all of the material factors considered by the Micrus board of

directors. In view of the variety of factors considered in connection with its evaluation of the merger agreement and the merger, the Micrus board of directors did not find it practicable to, and did not, quantify, rank or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendations. Rather, the Micrus board of directors viewed its position and recommendations as being based on the totality of the information presented to and considered by it. In considering the factors discussed above, individual members of the Micrus board of directors may have given different weight to different factors.

 

Micrus does not in the ordinary course make public forecasts or projections as to future performance, revenues, earnings or other results beyond the current fiscal quarter and is especially wary of making projections for extended periods due to, among other reasons, the unpredictability of the underlying assumptions and estimates. However, Micrus is including in this proxy statement prospective financial information, including our revenue, gross profits, earnings before interest and taxes (referred to in this proxy statement as EBIT), net income, earnings per share (referred to in this proxy statement as EPS) and earnings before interest, taxes, depreciation and amortization (referred to in this proxy statement as EBITDA) for the fiscal years ending March 31, 2011, 2012 and 2013 only to provide its stockholders access to certain non-public unaudited prospective financial information that was made available to the Parent board of directors, other potential buyers, the Micrus board of directors and Micrus’s financial advisors in connection with their consideration of the merger. Micrus provided this prospective financial information to Parent and other potential buyers in April 2010 and indicated that this forecast continued to reflect their current best judgment as to Micrus’s future financial performance in June 2010. The unaudited prospective financial information was not prepared with a view toward public disclosure or compliance with GAAP, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The inclusion of this prospective financial information should not be regarded as an indication that any of Micrus, its financial advisors, Parent or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results. None of Parent, Micrus or their respective affiliates assumes any responsibility for the accuracy of this information.

 

While presented with numeric specificity, the unaudited prospective financial information necessarily reflects numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, litigation, market and financial conditions, foreign currency rates, interest on investments, and matters specific to Micrus’s business, such as approval and successful launch of new products and competitive conditions, many of which are beyond Micrus’s control and may not be realized. The unaudited prospective financial information was, in general, prepared solely for internal use and is subjective in many respects. As a result, there can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated. Since the unaudited prospective financial information covers multiple years, such information by its nature becomes less predictive with each successive year. Micrus’s stockholders are urged to review Micrus’s most recent SEC filings for a description of risk factors with respect to Micrus’s business. See “Forward-Looking Information” beginning on page 15 and “Where You Can Find More Information” beginning on page 100. Neither Micrus’s independent registered public accounting firm, PwC, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of Micrus’s independent registered public accounting firm contained in Micrus’s Annual Report on Form 10-K for the year ended March 31, 2010, which is incorporated by reference into this proxy statement relates to Micrus’s historical financial information. It does not extend to the unaudited prospective financial information and should not be read to do so. Furthermore, the unaudited prospective financial information does not reflect revised prospects for Micrus’s business, changes in general business, economic, regulatory, market and financial conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the projections were prepared.

The following table presents selected unaudited prospective financial data for the fiscal years ending 2011, 2012 and 2013 which is referred to in this proxy statement (including in “— Opinion of Financial Advisor”) as the Micrus management projections:

 

 

 

 

In preparing the above unaudited prospective financial information, Micrus made the following material assumptions for the period from 2011 to 2013:

 

 

No assurances can be given that these assumptions will accurately reflect future conditions. In addition, although presented with numerical specificity, the above unaudited prospective financial information reflects numerous assumptions and estimates as to future events made by Micrus’s management that Micrus’s management believed were reasonable at the time the unaudited prospective financial information was

prepared. The above unaudited prospective financial information does not give effect to the merger. Micrus’s stockholders are urged to review Micrus’s most recent SEC filings for a description of Micrus’s reported and anticipated results of operations, financial condition and capital resources during 2010, including the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Micrus’s Annual Report on Form 10-K for the year ended March 31, 2010, which is incorporated by reference into this proxy statement.

 

Readers of this proxy statement are cautioned not to place undue reliance on the unaudited prospective financial information set forth above. No representation is made by Micrus, Parent or any other person to any stockholder of Micrus regarding the ultimate performance of Micrus compared to the information included in the above unaudited prospective financial information. The inclusion of unaudited prospective financial information in this proxy statement should not be regarded as an indication that such prospective financial information will be an accurate prediction of future events, and it should not be relied on as such.

 

MICRUS DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE.

 

Lazard rendered its opinion to the Micrus board of directors that, as of July 10, 2010 and based upon and subject to the assumptions, procedures, factors, limitations and qualifications set forth in such opinion, the per share merger consideration to be paid to holders of Micrus common stock (other than shares owned by Micrus as treasury stock, shares owned by Parent or Merger Sub and shares for which appraisal rights have been properly exercised and perfected under the DGCL) in the merger was fair, from a financial point of view, to the holders of Micrus common stock.

 

The full text of the written opinion of Lazard, dated July 10, 2010, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with its opinion, is attached to this proxy statement as Annex B and is incorporated herein by reference. Micrus stockholders should read the opinion in its entirety. Lazard provided its opinion to the Micrus board of directors in connection with its evaluation of the merger. Lazard’s opinion is not a recommendation as to how any holder of Micrus common stock should vote or act with respect to the merger or any matter relating thereto.

 

In connection with rendering its opinion described above and performing its related financial analyses, Lazard:

 

 

Lazard assumed and relied upon the accuracy and completeness of the foregoing information, without independent verification of such information. Lazard did not conduct any independent valuation or appraisal of any of the assets or liabilities (contingent or otherwise) of Micrus, or concerning the solvency or fair value of Micrus, and Lazard was not furnished with such valuation or appraisal. In that regard, Lazard assumed with the consent of the Micrus board of directors that the financial forecasts relating to Micrus provided to Lazard or otherwise reviewed or discussed with Lazard, were reasonably prepared on bases reflecting the best then currently available estimates and judgments of management of Micrus as to the future financial performance of Micrus. Lazard assumed no responsibility for, and expressed no view as to, such financial forecasts and estimates or the assumptions on which they were based.

 

In rendering its opinion, Lazard assumed, with the consent of the Micrus board of directors, that the final terms of the merger agreement conformed in all material respects with the latest draft reviewed by Lazard, and that merger will be consummated on the terms described in the latest draft of the merger agreement reviewed by Lazard, without any waiver or modification of any material terms or conditions, and that obtaining the necessary regulatory or third party approvals and consents for the merger will not have an adverse effect on Micrus. Lazard’s opinion did not address the relative merits of the merger as compared to any other transaction or business strategy in which Micrus might engage or the merits of the underlying decision by Micrus to engage in the transaction. Lazard’s opinion did not express any opinion as to any tax or other consequences that might result from the merger, nor did it address any legal, tax, regulatory or accounting matters, as to which Lazard understood that Micrus obtained such advice as it deemed necessary from qualified professionals. Lazard expressed no view or opinion as to any terms or other aspects of the merger (other than the per share merger consideration to the extent expressly specified in Lazard’s opinion). In addition, Lazard expressed no view or opinion as to the fairness of the amount or nature of, or any other aspects relating to, the compensation to any officers, directors or employees of any parties to the merger, or class of such persons, relative to the per share merger consideration or otherwise.

 

Lazard’s opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available as of, the date thereof. Lazard assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after the date thereof, and did not, and does not, express any opinion as to the price at which shares of Micrus common stock may trade at any time subsequent to the announcement of the merger.

 

The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and, therefore, is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth below, without considering the analyses as a whole, could create an incomplete or misleading view of the processes underlying the opinion of Lazard. In arriving at its opinion, Lazard considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Lazard made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the below analyses as a comparison is directly comparable to Micrus or the merger.

 

The following is a summary of the material financial analyses used by Lazard in connection with rendering its opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Lazard. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Lazard’s financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 10, 2010 and is not necessarily indicative of current market conditions.

 

Summary of Micrus Valuation

 

Comparable Companies Analysis

 

Lazard reviewed and analyzed selected public companies in the medical device industry that it viewed as reasonably comparable to Micrus based on Lazard’s knowledge of the medical device industry. In performing

these analyses, Lazard reviewed and analyzed publicly available financial information relating to the selected comparable companies and compared such information to the corresponding information for Micrus based on the Micrus management forecasts. Specifically, Lazard compared Micrus to the following nine public companies in the medical device industry:

 

 

 

 

Although none of the selected companies is directly comparable to Micrus, the companies included are publicly traded companies with operations and/or other criteria, such as lines of business, markets, business risks, growth prospects, maturity of business and size and scale of business, that for purposes of analysis Lazard considered similar to Micrus.

 

Based on equity analysts’ estimates and other public information, Lazard reviewed, among other things, the enterprise value of each selected comparable company as a multiple of such comparable company’s projected revenue calendarized for each of the fiscal years ended December 31, 2010 and December 31, 2011. A company’s enterprise value is equal to its short and long term debt plus the market value of its common equity and the value of any preferred stock (at liquidation value), minus its cash and cash equivalents.

 

The results of the analyses, which excluded ATS Medical, Inc. and ev3 Inc. as both companies had recently announced agreements to be acquired, were as follows:

 

 

Based on the foregoing, Lazard applied revenue multiples of 2.75x to 3.75x to Micrus’s calendar year 2010 estimated revenue and revenue multiples of 2.25x to 3.25x to Micrus’s calendar year 2011 estimated revenue to calculate an implied equity value per share range, in each case using estimated Micrus revenue from the Micrus management projections. The results of the analyses implied an equity value per share (using a treasury stock method) range for Micrus of $17.21 to $23.33.

 

Discounted Cash Flow Analysis

 

Based on the Micrus management projections and guidance provided by Micrus, and assuming use of net operating losses per Micrus’s accountants’ guidance, Lazard performed a discounted cash flow analysis of Micrus to calculate the estimated present value of the standalone, unlevered, after-tax free cash flows that Micrus could generate during the fiscal years ended March 31, 2011 through March 31, 2013. Lazard also calculated terminal values at fiscal year end 2013 by applying a revenue exit multiple range of 3.00x to 4.00x (derived based on the statistics of the selected comparable companies used in the comparable companies analysis) to Micrus’s estimated revenue provided by the Micrus management projections for its fiscal year

ending March 31, 2013, implying a perpetuity growth rate range of 4.9% to 8.3%. The standalone, unlevered, after-tax free cash flows and terminal values were discounted to present value using discount rates ranging from 11.0% to 13.0%, which were based on a weighted average cost of capital analysis of the selected comparable companies used in the comparable companies analysis. The results of these analyses implied an equity value per share (using a treasury stock method) range for Micrus of $22.11 to $28.49.

 

Precedent Transactions Analysis

 

Lazard reviewed and analyzed certain publicly available financial information of target companies in selected recent precedent merger and acquisition transactions involving companies in the medical device industry it viewed as comparable to the merger. In performing these analyses, Lazard analyzed certain financial information and transaction multiples relating to the target companies involved in the selected transactions and compared such information to the corresponding information for Micrus.

 

Specifically, Lazard reviewed two groups of transactions. The first group consisted of transactions since 2007 involving targets demonstrating high rates of growth (referred to in this proxy statement as High Growth Transactions), defined as revenue growth greater than 10% from the year prior to the transaction to the year following the transaction, and revenue in excess of $50 million during the year prior to the transaction. The second group consisted of transactions since 2007 involving targets in the vascular field (referred to in this proxy statement as the Vascular Transactions). Lazard analyzed 23 High Growth Transactions and 14 Vascular Transactions.

 

The High Growth Transactions reviewed were (listed by target and acquiror):

 

 

For each of the High Growth Transactions, Lazard calculated and, to the extent information was publicly available, compared transaction value as a multiple of revenue, in each case, for the year prior to and the year after the date that the relevant transaction was announced. In calculating transaction value as a multiple of revenue for the year after the date each transaction was announced, Lazard used projected revenue estimates from publicly available equity research analyst reports.

The results of the analyses were as follows:

 

 

The Vascular Transactions reviewed were (listed by target and acquiror):

 

 

For each of the Vascular Transactions, Lazard calculated and, to the extent information was publicly available, compared transaction value as a multiple of revenue, in each case, for the year prior to and the year after the date that the relevant transaction was announced. As with the analyses of the High Growth Transactions, in calculating transaction value as a multiple of revenue for the year after the date each of the above transactions was announced, Lazard used projected revenue estimates from publicly available equity research analyst reports.

 

The results of the analyses were as follows:

 

 

Based on the foregoing analyses, Lazard applied revenue multiples of 3.50x to 4.75x to Micrus’s prior year revenue for the fiscal year ending March 31, 2010 and multiples of 3.00x to 4.25x to Micrus’s forward year revenue for the fiscal year ending March 31, 2011 to calculate an implied equity value per share range. Lazard used prior year revenue and forward year estimated revenue from the Micrus management projections. The results of the analyses implied an equity value per share (using a treasury stock method) range for Micrus of $19.36 to $26.09.

 

Although none of the selected precedent transactions or the companies party to such transactions is directly comparable to the merger or to Micrus, all of the transactions were chosen because they involve

transactions that, for purposes of analysis, may be considered similar to the merger and/or involve publicly traded companies with operations that, for purposes of analysis, may be considered similar to certain operations of Micrus.

 

Additional Analyses of Micrus

 

The analyses and data described below were presented to the board of directors for informational purposes only, and were not material to the rendering of Lazard’s opinion.

 

Premiums Paid Analysis

 

Lazard performed a premiums paid analysis based on premiums paid in certain U.S. public merger and acquisition transactions since January 2007 involving target companies in the medical device industry with a transaction value in excess of $100 million.

 

The implied premiums in this analysis were calculated by comparing the per share acquisition price to the target company’s (i) closing share price one-day prior to announcement, (ii) average closing share price for the one-month and three-month periods prior to announcement, and (iii) 52-week high prior to the announcement of the transaction. The median of premiums ranged from 16% to 43% and the mean of premiums ranged from 17% to 52%.

 

Lazard applied the median premiums from these transactions to the corresponding share price for Micrus as of July 8, 2010. The results of the analyses implied an equity value per share range for Micrus of $26.01 to $29.01.

 

Lazard also applied the median premiums from these transactions to the corresponding share price for Micrus as of May 28, 2010. The results of the analyses implied an equity value per share range for Micrus of $23.31 to $27.72. Lazard viewed May 28, 2010 as a significant date in its analysis because on the following business day ev3 Inc., a competitor of Micrus, announced its agreement to be acquired, and thereafter Micrus’s share price increased relative to applicable medical device peer group indices and broader market indices as a whole. Lazard believed such increase resulted from market perceptions that, given the ev3 Inc. acquisition, Micrus may soon be an acquisition target.

 

52-Week Trading Range

 

Lazard reviewed the historical price performance (and trading volume) of Micrus’s common stock for the 52-week period ending as of July 9, 2010. During this period, the intraday trading price of Micrus common stock ranged from approximately $7.80 per share to $22.50 per share. Lazard also reviewed the historical price performance of Micrus’s common stock for incremental periods, including periods of one, two, three, six, nine and twelve months ending as of July 9, 2010. The use of the incremental time periods is designed to capture the progression of Micrus’s share price and isolate the effects of specific corporate or other events on share price performance. The following table sets forth the results of these analyses.

 

Analyst Target Price

 

Lazard reviewed the most recent Wall Street research equity analyst per share target prices for Micrus common stock, which ranged from $21.50 to $25.00 per share.

 

Miscellaneous

 

Lazard prepared these analyses for purposes of providing its opinion to the Micrus board of directors as to the fairness from a financial point of view to the holders of the outstanding shares of Micrus common stock (other than with respect to shares owned by Micrus as treasury stock, shares owned by Parent or Merger Sub and shares for which appraisal rights have been properly exercised and perfected under the DGCL) of the per share merger consideration. These analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Micrus, Lazard or any other person assumes responsibility if future results are materially different from those forecast. As described above, Lazard’s opinion to the Micrus board of directors was one of many factors taken into consideration by the Micrus board of directors in making its determination to approve the merger agreement. The per share merger consideration was determined through arms’-length negotiations between Micrus and Parent and was approved by the Micrus board of directors. Lazard provided advice to Micrus during these negotiations. Lazard did not, however, recommend any specific amount of consideration to Micrus or its board of directors or that any specific merger consideration constituted the only appropriate consideration for the merger.

 

Lazard, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, leveraged buyouts, and valuations for estate, corporate and other purposes. In the ordinary course of their respective business, Lazard and LFCM Holdings LLC (an entity indirectly owned in large part by managing directors of Lazard) and their respective affiliates may actively trade securities of Micrus and/or Parent for their own accounts and for the accounts of their customers and, accordingly, may at any time hold a long or short position in such securities. Lazard and/or LFCM Holdings LLC may in the future provide investment banking services to the combined company and would expect to receive customary fees.

 

Lazard is an internationally recognized investment banking firm providing a full range of financial advisory and securities services. Lazard was selected to act as investment banker to Micrus because of its qualifications, expertise and reputation in investment banking and mergers and acquisitions, as well as its familiarity with Micrus. Pursuant to a letter agreement dated March 1, 2010, Micrus engaged Lazard to act as its sole financial advisor in connection with the merger. Pursuant to the terms of this engagement letter, Micrus has agreed to pay Lazard a fee of 1.35% of the aggregate consideration to be paid in the transaction, or approximately $5.8 million. $1.0 million of that fee became payable upon Lazard’s rendering of its opinion and the remainder of the fee shall be payable upon the consummation of the merger. In addition, Micrus has agreed to reimburse Lazard’s reasonable expenses, including expenses of legal counsel, in connection with this engagement and to indemnify Lazard and related persons against various liabilities, including certain liabilities under the U.S. federal securities laws.

 

As described above, the opinion of Lazard was one of many factors taken into consideration by the Micrus board of directors in making the determination to approve the merger agreement. Consequently, the analyses described above should not be viewed as determinative of the opinion of the Micrus board of directors.

 

In considering the recommendation of the Micrus board of directors, you should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, those of our stockholders. Micrus’s board of directors was aware of these interests and considered them, among other matters, in making their recommendation.

 

The interests related to or arise from, among other things:

 

 

These interests are described below. The dates used below to quantify these interests have been selected for illustrative purposes only. They do not necessarily reflect the dates on which certain events will occur.

 

Equity Awards

 

Our directors and executive officers hold stock options that vest solely based on the passage of time. As described under “The Merger Agreement — Treatment of Stock Options,” each stock option that has a per share exercise price lower than the per share merger consideration that remains outstanding as of immediately prior to the merger, whether or not vested or exercisable, will be automatically converted into the right to receive an amount in cash (less applicable withholding) equal to the product of (x) the number of shares of our common stock that would have been issuable upon exercise of such stock option immediately prior to the effective time of the merger and (y) the excess of $23.40 over the per share exercise price of such Company stock option.

 

The following table summarizes the unvested and vested stock options held by our directors and executive officers that will be outstanding as of the date of the merger, and the consideration that each director and executive officer will receive pursuant to the merger agreement with respect to such options, based on stock options outstanding as of July 22, 2010 and assuming for these purposes that the merger occurs on September 30, 2010 and that no such stock options are exercised between July 22, 2010 and the closing of the Merger.

 

 

Executive Employment Agreements

 

Severance Agreements

 

Robert A. Stern, the Company’s President and Chief Operating Officer, is currently party to a letter agreement with the Company, dated as of November 5, 2003 and amended on December 12, 2008, that entitles him to severance payments equal to his base salary as in effect on the termination date for twelve months following (i) termination of employment by the Company other than for cause, death or disability or by the executive officer for good reason within twelve months after a change in control of the Company (referred to in this proxy statement as Change in Control Termination) or (ii) termination of employment by the Company other than for cause, death or disability that does not occur within twelve months after a change in control of the Company. The severance benefits set forth in Mr. Stern’s letter agreement may be subject to reduction if Mr. Stern becomes an employee of another entity or engages in full-time consulting for one or more entities during the one-year period following termination of employment.

 

Carolyn M. Bruguera, the Company’s Vice President and General Counsel is currently party to a letter agreement with the Company, dated as of November 1, 2005 and amended on December 12, 2008, that entitles her to severance payments equal to her base salary as in effect on the termination date for six months following (i) a Change in Control Termination or (ii) termination of employment by the Company other than for cause, death or disability that does not occur within twelve months after a change in control of the Company.

 

In connection with the execution of the merger agreement, the Micrus board of directors approved and the Company entered into letter agreements, dated as of July 10, 2010, with R. Michael Crompton, the Company’s Vice President Regulatory/Clinical Affairs & Quality; Edward F. Ruppel, Jr., the Company’s Senior Vice President and Corporate Compliance Officer; Gordon Sangster, the Company’s Chief Financial Officer; and Richard J. Snyder, the Company’s Vice President, Human Resources, amending and supplementing each such executive officer’s offer letter with the Company to provide for severance payments to such executive officers under the circumstances described below (referred to in this proxy statement as New Severance Agreements).

 

The New Severance Agreements entitle the applicable executive officer to severance payments equal to such executive officer’s base salary as in effect on the termination date for six months following (i) a Change in Control Termination or (ii) termination of employment by the Company other than for cause, death or permanent disability that does not occur within twelve months after a change in control of the Company.

 

The Company also entered into letter agreements, dated as of July 10, 2010, with John T. Kilcoyne, the Company’s Chief Executive Officer, and Robert C. Colloton, the Company’s Vice President Global Sales and Marketing (referred to in this proxy statement as Amended Severance Agreements and together with the New

Severance Agreements, the Severance Agreements), amending their existing offer letters with the Company. Their existing offer letters had provided for payment of six months’ worth of severance under specified conditions. The Amended Severance Agreements provide Mr. Colloton and Mr. Kilcoyne with severance rights consistent with those granted under the New Severance Agreements.

 

The severance benefits set forth in the letter agreements with each of Mr. Stern and Ms. Bruguera and the Severance Agreements are conditioned upon the applicable executive officer executing a release of claims provided by the Company.

 

Retention Agreements

 

In connection with the execution of the merger agreement, and as a condition to the willingness of Parent and Merger sub to enter into the merger agreement, the Micrus board of directors approved, and concurrently with the execution of the merger agreement the Company entered into, agreements with Mr. Kilcoyne, Mr. Colloton, Mr. Crompton, Mr. Ruppel, Jr., Mr. Sangster, Mr. Snyder, Mr. Stern, and Ms. Bruguera (referred to in this proxy statement as the Retention Agreements). Under the Retention Agreements, in exchange for agreeing to limit the circumstances under which he or she may terminate employment for good reason on and after the closing of the merger and receive severance, each such executive officer is entitled to retention payments (referred to in this proxy statement as the Retention Bonuses) equal to such employee’s base salary for six months, payable over a six-month period (or, in the case of Mr. Stern, twelve months, payable over a twelve-month period), provided that he or she remains an active, full-time employee of the Company or its affiliates for the twelve-month period following the closing of the merger. Under the Retention Agreements, each such executive officer is only entitled to severance payments in the event that his or her employment is terminated by the Company other than for cause, death or permanent disability or by such executive officer for good reason (as limited by the Retention Agreements) within twelve months after the closing of the merger. The Retention Agreements also provide that if an executive officer becomes entitled to payment of the Retention Bonus, such executive officer will not be entitled to any severance payments or benefits under any employment or other agreement and that no stock option, restricted stock unit or other equity-based or equity-related award granted to him or her on or after the closing will be subject to accelerated vesting in connection with a termination of employment. The Retention Bonuses are conditioned upon the applicable executive officer executing a general waiver and release of claims provided by the Company. The Retention Agreements provide that they will be null and void if the merger agreement is terminated prior to the closing of the merger.

 

The completion of the merger will constitute a change in control under each of the Severance Agreements and Retention Agreements. Based on compensation and benefit levels as of July 22, 2010, and assuming that the merger is consummated on September 30, 2010, and that each executive officer either (i) experiences a qualifying termination of employment at that time or (ii) remains an active full-time employee of the Company or its affiliates for the twelve-month period following the closing of the merger, the executive officers will be entitled to receive the following cash severance or retention payments under their Retention Agreements.

 

Directors’ and Officers’ Indemnification and Insurance

 

Pursuant to the merger agreement, from and after the effective time of the merger, Parent has agreed to, and to cause the surviving corporation to, assume all obligations existing in favor of the current or former directors or officers of the Company or any of its subsidiaries with respect to all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger as provided in the certificate of incorporation or bylaws of the Company or any indemnification agreement between an indemnified party and the Company or any of its subsidiaries. The certificate of incorporation and bylaws of the surviving corporation will contain the provisions with respect to indemnification and advancement of expenses set forth in the certificate of incorporation and bylaws of the Company as amended, restated and in effect on the date of the merger agreement, which provisions may not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of the indemnified parties, unless such modification is required by law.

 

Parent has agreed to obtain, at the effective time of the merger, a prepaid (or tail) directors’ and officers’ liability insurance policy in respect of acts or omissions occurring at or prior to the effective time of the merger for six (6) years from the effective time of the merger, covering each person currently covered by the Company’s directors’ and officers’ liability insurance policy on terms with respect to such coverage and amounts no less favorable than those of the Company’s current policy; provided, that, Parent shall not be obligated to pay more than $700,000 in the aggregate in satisfying such obligation. In the event such a policy cannot be obtained for $700,000 or less, Parent has agreed to obtain as much coverage for not less than six (6) years from the effective time of the merger as may be obtained for such $700,000 in the aggregate.

 

The merger agreement provides that, for a period of 12 months following the effective time of the merger, Parent agrees to (i) provide, or cause its subsidiaries to provide, to employees of the Company and its subsidiaries who are primarily employed in the United States (referred to in this proxy statement as US Employees) who remain in the employment of the surviving corporation base salary or hourly wage rates that, on an individual-by-individual basis, are not less than those provided to such US Employees immediately prior to the effective time of the merger and (ii) either (A) maintain, or cause its subsidiaries to maintain, the material benefit plans of the Company (excluding any equity-based compensation) at the benefit levels in effect immediately prior to the effective time of the merger, or (B) provide, or cause its subsidiaries to provide, employee benefits (excluding any equity-based compensation, defined benefit pensions or retiree medical benefits) that are no less favorable to each US Employee, in the aggregate, than those in effect for such US Employee immediately prior to the effective time of the merger.

 

Parent will, or will cause the surviving corporation to, recognize the service of each US Employee as if such service had been performed with Parent (i) for purposes of vesting (but not benefit accrual) under Parent’s defined benefit pension plan, (ii) for purposes of eligibility under Parent’s 401(k) retirement plan, (iii) for purposes of eligibility for vacation under Parent’s vacation program, (iv) for purposes of eligibility and participation under any health or welfare plan maintained by Parent (other than any post-employment health or post-employment welfare plan) and (v) unless covered under another arrangement with or of the Company, for benefit accrual purposes under Parent’s severance plan, in each case, solely to the extent that Parent makes such plan or program available to such employees of the surviving corporation and not in any case where credit would result in duplication of benefits, but not for purposes of any other employee benefit plan of Parent. Parent will, or will cause the surviving corporation to, (A) reduce any period of limitation on health benefits coverage of US Employees due to pre-existing conditions (or actively at work or similar requirements) under the applicable health benefits plan of Parent or an affiliate of Parent by the number of days of an individual’s “creditable coverage,” to the extent required by Section 701 of ERISA, (B) waive any and all eligibility waiting periods and evidence of insurability requirements with respect to such US Employees to the extent such eligibility waiting periods or evidence of insurability requirements were waived with respect to the US Employees under the Company’s benefits plans and (C) credit each US Employee with all deductible payments, out-of-pocket or other co-payments paid by such employee under the health benefit plans of the Company or its affiliates prior to the closing date of the merger during the year in which the closing occurs.

Parent will cause to be provided to employees of the Company and its subsidiaries who are primarily employed outside the United States with employee benefits in accordance with applicable law.

 

The merger agreement further provides that no provision of the merger agreement will (i) create any right in any employee of the Company to continued employment by Parent, the surviving corporation or any affiliate of Parent, or preclude the ability of Parent, the Company, the surviving corporation or any respective subsidiary thereof, to terminate the employment of any employee for any reason or (ii) require Parent or the surviving corporation to continue any benefit plan or prevent the amendment, modification, or termination thereof after the date of the closing of the merger. The merger agreement also provides that the employee benefit matters provision of the merger agreement described above will be binding upon and will inure solely to the benefit of the parties to the merger agreement.

 

For an additional discussion of employee benefits, see “The Merger Agreement — Employee Matters.”

 

As described under “The Merger Agreement — 2005 Employee Stock Purchase Plan,” Micrus will terminate the Micrus 2005 Employee Stock Purchase Plan prior to the effective time of the merger.

 

If the merger is completed, Micrus common stock will be delisted from the NASDAQ and will be deregistered under the Exchange Act.

Certain Relationships Between Micrus and Parent

 

On March 2, 2010, Micrus and Codman entered into a confidentiality agreement with respect to confidential and proprietary information of Micrus made available to Codman for the purpose of evaluating a potential transaction.

 

Other than the agreements discussed above, there are no present or proposed material agreements, arrangements, understandings or relationships between Micrus or any of its executive officers, directors, controlling persons or subsidiaries, on the one hand, and Parent, Merger Sub or any of their respective executive officers, directors, controlling persons or subsidiaries, on the other hand, other than the merger agreement or with respect to the merger agreement, other than the severance and retention agreements described in “ — Interests of Micrus’s Directors and Executive Officers in the Merger.” Parent and its subsidiaries do not own any shares of Micrus common stock.

 

In connection with the merger, record holders of Micrus common stock who comply with the procedures summarized below will be entitled to appraisal rights if the merger is completed. Under Section 262 of the DGCL (referred to in this section of the proxy statement as Section 262), as a result of completion of the merger, holders of shares of Micrus common stock, with respect to which appraisal rights are properly demanded and perfected and not withdrawn or lost, are entitled, in lieu of receiving the merger consideration, to have the “fair value” of their shares at the effective time of the merger (exclusive of any element of value arising from the accomplishment or expectation of the merger) judicially determined and paid to them in cash by complying with the provisions of Section 262. Micrus is required to send a notice to that effect to each stockholder not less than 20 days prior to the annual meeting. This proxy statement constitutes that notice to you.

 

Stockholders of record who desire to exercise their appraisal rights must satisfy all of the following conditions.

 

A stockholder who desires to exercise appraisal rights must (a) not vote in favor of the adoption of the merger agreement and (b) deliver a written demand for appraisal of the stockholder’s shares to the Corporate Secretary of Micrus before the vote on the merger agreement at the meeting.

A demand for appraisal must be executed by or for the stockholder of record, fully and correctly, as the stockholder’s name appears on the certificates representing shares. If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by the fiduciary. If shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand must be executed by all joint owners. An authorized agent, including an agent of two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner and expressly disclose that, in exercising the demand, the agent is acting as agent for the record owner. In addition, the stockholder must continuously hold the shares of record from the date of making the demand through the effective time of the merger.

 

A record owner, such as a broker, who holds shares as a nominee for others may exercise appraisal rights with respect to the shares held for all or less than all beneficial owners of shares as to which the holder is the record owner. In that case, the written demand must set forth the number of shares covered by the demand. Where the number of shares is not expressly stated, the demand will be presumed to cover all shares outstanding in the name of the record owner.

 

Beneficial owners who are not record owners and who intend to exercise appraisal rights should instruct the record owner to comply strictly with the statutory requirements with respect to the exercise of appraisal rights before the vote on the adoption of the merger agreement at the meeting. A holder of shares held in “street name” who desires appraisal rights with respect to those shares must take such actions as may be necessary to ensure that a timely and proper demand for appraisal is made by the record owner of the shares. Shares held through brokerage firms, banks and other financial institutions are frequently deposited with and held of record in the name of a nominee of a central security depositary. Any holder of shares desiring appraisal rights with respect to such shares who held such shares through a brokerage firm, bank or other financial institution is responsible for ensuring that the demand for appraisal is made by the record holder. The stockholder should instruct such firm, bank or institution that the demand for appraisal must be made by the record holder of the shares, which might be the nominee of a central security depositary if the shares have been so deposited.

 

As required by Section 262, a demand for appraisal must be in writing and must reasonably inform Micrus of the identity of the record holder (which might be a nominee as described above) and of such holder’s intention to seek appraisal of such shares.

 

Stockholders of record who elect to demand appraisal of their shares must mail or deliver their written demand to: Micrus Endovascular Corporation, 821 Fox Lane, San Jose, California 95131, Attention: Corporate Secretary. The written demand for appraisal should specify the stockholder’s name and mailing address, the number of shares owned, and that the stockholder is demanding appraisal of his, her or its shares. The written demand must be received by Micrus prior to the meeting. Neither voting (in person or by proxy) against, abstaining from voting on or failing to vote on the proposal to adopt the merger agreement will alone suffice to constitute a written demand for appraisal within the meaning of Section 262. In addition, the stockholder must not vote its shares of common stock in favor of adoption of the merger agreement. Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of adoption of the merger agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the merger agreement or abstain from voting on the adoption of the merger agreement.

 

Within 10 days after the effective time of the merger, the surviving corporation must notify each holder of our common stock who has complied with Section 262 and who has not voted in favor of the adoption of the merger agreement that the merger has become effective. You will receive no further notices from the surviving corporation regarding your appraisal rights after such notice that the merger has become effective. The surviving corporation is under no obligation to and has no present intention to file a petition. Accordingly, it is the obligation of the holders of our common stock to initiate all necessary action to perfect their appraisal rights in respect of shares of Micrus common stock within the time prescribed in Section 262. Within 120 days after the effective time of the merger, either the surviving corporation in the merger or any stockholder who has timely and properly demanded appraisal of such stockholder’s shares and who has complied with the requirements of Section 262 and is otherwise entitled to appraisal rights, or any beneficial owner of the stock

for which a demand for appraisal has been properly made, may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of all stockholders who have properly demanded appraisal. If a petition for an appraisal is timely filed, after a hearing on such petition, the Delaware Court of Chancery will determine which stockholders are entitled to appraisal rights and thereafter will appraise the shares owned by those stockholders, determining the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest to be paid, if any, upon the amount determined to be the fair value.

 

Stockholders considering seeking appraisal should bear in mind that the fair value of their shares determined under Section 262 could be more than, the same as, or less than the merger consideration they are entitled to receive pursuant to the merger agreement if they do not seek appraisal of their shares, and that opinions of investment banking firms as to the fairness from a financial point of view of the consideration payable in a transaction are not opinions as to, and do not address, fair value under Section 262.

 

The cost of the appraisal proceeding may be determined by the Delaware Court of Chancery and charged upon the parties as the Delaware Court of Chancery deems equitable in the circumstances. Upon application of a stockholder seeking appraisal rights, the Delaware Court of Chancery may order that all or a portion of the expenses incurred by such stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all shares entitled to appraisal. In the absence of such a determination of assessment, each party bears its own expenses.

 

Except as explained in the last sentence of this paragraph, at any time within 60 days after the effective time of the merger, any stockholder who has demanded appraisal and who has not commenced an appraisal proceeding or joined that proceeding as a named party, shall have the right to withdraw such stockholder’s demand for appraisal and to accept the cash to which the stockholder is entitled pursuant to the merger. After this period, the stockholder may withdraw such stockholder’s demand for appraisal only with the consent of the surviving corporation. If no petition for appraisal is filed with the Delaware Court of Chancery within 120 days after the effective time of the merger, stockholders’ rights to appraisal shall cease and all stockholders shall be entitled only to receive the merger consideration as provided for in the merger agreement. Inasmuch as the parties to the merger agreement have no obligation to file such a petition, and have no present intention to do so, any stockholder who desires that such petition be filed is advised to file it on a timely basis. No petition timely filed in the Delaware Court of Chancery demanding appraisal shall be dismissed as to any stockholders without the approval of the Delaware Court of Chancery, and that approval may be conditioned upon such terms as the Delaware Court of Chancery deems just.

 

The foregoing is a brief summary of Section 262 that sets forth the procedures for demanding statutory appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262, of which a copy of the text is attached hereto as Annex C. Failure to comply with all the procedures set forth in Section 262 will result in the loss of a stockholder’s statutory appraisal rights.

 

Parent has represented in the merger agreement that it has, and as of the closing will have, sufficient immediately available funds to pay when due the aggregate merger consideration and to pay when due all of its fees and expenses related to the transactions contemplated by the merger agreement. The receipt of financing by Parent is not a condition to the obligations of either party to complete the merger under the terms of the merger agreement.

 

The following is a summary of the material United States federal income tax consequences of the merger to our stockholders who hold our common stock as a “capital asset” (generally, property held for investment) under the Internal Revenue Code of 1986, as amended, and whose shares are converted into the right to receive cash in the merger. This summary is based upon United States federal income tax law in effect on the

date hereof, which is subject to change or different interpretations, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of their individual investment circumstances, such as common stock held by investors subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, partnerships and their partners, and tax-exempt organizations (including private foundations)) or to investors that hold our common stock as part of a straddle, hedge, conversion, constructive sale, or other integrated security transaction for United States federal income tax purposes, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any state, local, or non-United States tax considerations. Stockholders are urged to consult their tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations of the merger.

 

For purposes of this summary, a “U.S. holder” is a beneficial owner of our common stock who is, for United States federal income tax purposes (1) an individual who is a citizen or resident of the United States, (2) a corporation created in, or organized under the laws of, the United States or any state or political subdivision thereof, (3) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (4) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that otherwise elected to be treated as a United States person under applicable United States Treasury regulations.

 

A “non-U.S. holder” is a beneficial owner of our common stock who is not a “U.S. holder” and is not an entity that is treated as a partnership for United States federal income tax purposes.

 

If a partnership (including any entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our common stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Stockholders who are partners of a partnership holding our common stock are urged to consult their tax advisors regarding the tax consequences of the merger.

 

U.S. Holders

 

The exchange of shares of our common stock for cash pursuant to the merger will be a taxable transaction for United States federal income tax purposes. In general, a stockholder who receives cash in exchange for shares of our common stock pursuant to the merger will recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received and the stockholder’s adjusted tax basis in the shares exchanged. Such gain or loss generally will be long-term provided that at the time of completion of the merger, the shares were held by the stockholder for more than one year. The deductibility of a capital loss may be subject to limitations.

 

Non-U.S. Holders

 

A non-U.S. holder generally will not be subject to United States federal income tax on gain realized on the receipt of cash pursuant to the merger provided that (1) the gain is not effectively connected with the conduct of a trade or business within the United States, or if required by an applicable income tax treaty, is not attributable to a U.S. permanent establishment maintained by the non-U.S. holder in the United States; and (2) in the case of a non-U.S. holder that is an individual, such non-U.S. holder is not present in the United States for 183 days or more in the taxable year of the merger.

 

Backup Withholding and Information Reporting

 

Under the U.S. backup withholding tax rules, unless an exemption applies, the exchange agent will be required to withhold, and will withhold, 28% of all payments to which a holder of our common stock is entitled in connection with the merger unless, in the case of a U.S. holder, the holder provides its taxpayer identification number (generally, its social security number in the case of an individual or its employer identification number in the case of other holders), certifies that such number is correct and that no backup withholding is otherwise required and otherwise complies with such backup withholding rules. U.S. holders

should complete, sign and return to the exchange agent Internal Revenue Service Form W-9 (or substitute form) or otherwise establish an exception in a manner satisfactory to the exchange agent in order to avoid backup withholding. Non-U.S. holders should complete, sign and return to the exchange agent the appropriate Internal Revenue Service Form W-8 or otherwise establish an exception in a manner satisfactory to the exchange agent in order to avoid backup withholding. Backup withholding is not an additional tax. In general, any amounts withheld under the backup withholding rules may be refunded or credited against the holder’s U.S. federal income tax liability, if any, provided that the holder furnishes the required information to the Internal Revenue Service in a timely manner. Cash received pursuant to the merger will also be subject to information reporting, unless an exemption applies. Please see the instructions in the letter of transmittal for more details regarding compliance with the United States backup withholding tax rules.

 

United States Antitrust Laws

 

The merger is subject to the Hart-Scott-Rodino Antitrust Improvements Act (referred to in this proxy statement as HSR Act). Under the HSR Act and the rules promulgated thereunder, the merger may not be completed until notifications have been submitted to the Antitrust Division of the Department of Justice and the Federal Trade Commission, referred to in this proxy statement as the DOJ and FTC respectively, and until a statutory 30-day waiting period has expired or been terminated. If the reviewing agency issues a formal request for additional information and documentary material, the parties may not complete the merger until 30 days after both parties substantially comply with the request, unless this second waiting period is terminated earlier by the reviewing agency. Micrus filed the required notification under the HSR Act on July 23, 2010 with both the DOJ and the FTC. Parent separately filed the required notification under the HSR Act on July 23, 2010 with both the DOJ and the FTC.

 

At any time before or after completion of the merger, the DOJ or the FTC could take any action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin completion of the merger. Private parties also could take action under the antitrust laws, including seeking an injunction prohibiting or delaying the merger, divestiture or damages under certain circumstances.

 

In addition, the merger may be reviewed by the attorneys general in the various states in which Parent and Micrus operate. These authorities may claim that there is authority, under the applicable state and federal antitrust laws and regulations, to investigate and/or disapprove of the merger under the circumstances and based upon the review set forth in applicable state laws and regulations. There can be no assurance that one or more state attorneys general will not file an antitrust action to challenge the merger.

 

Foreign Antitrust Laws

 

In addition to the antitrust regulatory clearances described above, clearances from other governmental agencies are required prior to the completion of the merger. Filings have been made (or will be promptly made) with the relevant antitrust authorities in Austria, Italy, Spain and the United Kingdom. Such governmental authorities could take action under applicable antitrust laws, including prohibiting the completion of the merger.

 

There is no assurance that Micrus and Parent will obtain all required regulatory approvals.

 

Other than the filings described above, neither Micrus nor Parent is aware of any regulatory approvals required to be obtained, or waiting periods to expire, to complete the merger. If the parties discover that other approvals or waiting periods are necessary, they will seek to obtain or comply with them. If any additional approval or action is needed, however, Micrus or Parent may not be able to obtain it, as is the case with respect to the other necessary approvals. Even if Micrus and Parent obtain all necessary approvals, and the merger agreement is adopted by Micrus stockholders, conditions may be placed on any such approval that could cause Parent to abandon the merger.

 

On July 13, 2010, an alleged stockholder filed a putative class action entitled Robert Sauser v. Micrus Endovascular Corporation et al. , Case No. 110-CV-176769, in the Superior Court of the State of California, Santa Clara County. The defendants are Micrus and the members of our board of directors. The complaint alleges that the individual defendants breached their fiduciary duties to Micrus stockholders in connection with the merger agreement and the transactions contemplated thereby. Specifically, the complaint alleges, among other things, that the proposed transaction arises out of a flawed process, that the individual defendants engaged in self-dealing in relation to the merger agreement, which resulted in a failure to maximize stockholder value. The suit further alleges that Micrus aided and abetted the individual defendants’ breaches of fiduciary duties and that the consideration offered in the merger does not fairly reflect Micrus’s true value. The plaintiff seeks, among other things, an order enjoining the consummation of the merger, attorneys’ fees and costs.

 

On July 19, 2010, an alleged stockholder filed a putative class action entitled Claire Houston v. John Kilcoyne et al., Case No. 110-CV-177667, in the Superior Court of the State of California, Santa Clara County. The defendants are Micrus and the members of our board of directors (together with Micrus, the Micrus Defendants), Johnson & Johnson and Cope Acquisition Corp. (a wholly owned subsidiary of Johnson & Johnson, and together with Johnson & Johnson, the J&J Defendants). This action alleges that the individual defendants breached their fiduciary duties to our stockholders in connection with the merger. Specifically, the complaint alleges, among other things, that the proposed transaction arises out of a flawed process, that the individual defendants failed to maximize shareholder value and that the consideration offered in the merger is inadequate and does not fairly reflect our true value. The plaintiff also alleges that the individual defendants agreed to no-solicitation and termination provisions in the merger agreement in violation of our board’s fiduciary duties. The suit further alleges that we and the J&J Defendants aided and abetted the individual defendants’ breaches of fiduciary duties. The plaintiff seeks, among other things, an order enjoining the Micrus Defendants and the J&J Defendants from consummating the merger, damages in the event the merger is consummated prior to the court’s entry of a final judgment, and attorneys’ fees and costs.

 

We believe that the lawsuits are wholly without merit and intend to defend vigorously against them. However, because the litigation is in the early stages, we cannot predict the outcome at this time, and we cannot be assured that the actions will not delay the consummation of the merger or result in substantial costs; even a meritless lawsuit may potentially delay consummation of the merger.

 

The approval and adoption of the merger agreement requires the affirmative vote of a majority of the outstanding shares of Micrus common stock entitled to vote. The approval and adoption of the merger agreement is a condition to the closing of the merger.

 

The following summary describes the material provisions of the merger agreement, and is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A to this proxy statement. This summary may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety, as it is the legal document that contains the terms and conditions of the merger.

 

The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about Micrus. Such information can be found elsewhere in this document and in the public filings that Micrus makes with the SEC, which are available without charge through the SEC’s website at www.sec.gov .

 

The representations and warranties and covenants relating to conduct of Micrus’s business described below and included in the merger agreement were made by Micrus to Parent and Merger Sub and, in the case of representations and warranties, by Parent and Merger Sub to Micrus. These representations and warranties

were made as of specific dates and such representations and warranties, as well as the covenants relating to the conduct of the business, are in some cases subject to important exceptions, limitations and supplemental information contained in the confidential disclosure schedule that Micrus provided to Parent and Merger Sub in connection with the signing of the merger agreement, and are additionally subject to contractual standards of materiality that may be different from those generally applicable under U.S. federal securities laws. In addition, the representations and warranties and covenants relating to conduct of the business may have been included in the merger agreement for the purpose of allocating risk between Parent and Micrus, rather than to establish matters as facts. While Micrus does not believe that its disclosure schedule contains information that the securities laws require it to disclose, other than information that has already been so disclosed, its disclosure schedule contains information that modifies, qualifies and creates exceptions to the representations and warranties and covenants relating to conduct of the business set forth in the merger agreement. Accordingly, you should not rely on the representations and warranties and covenants relating to conduct of the business as characterizations of the actual state of facts, since the representations and warranties and covenants relating to conduct of the business are subject, in important part, to Micrus’s disclosure schedule. Micrus’s disclosure schedule contains information that has been included in its prior public disclosures, as well as additional non-public information. Information concerning the subject matter of Micrus’s representations and warranties and covenants relating to conduct of the business may have changed since the date of the merger agreement, and subsequent information may or may not be fully reflected in its public disclosures.

 

If all the conditions to the merger are satisfied or, to the extent permitted by law, waived in accordance with the merger agreement, Merger Sub will merge with and into Micrus, with Micrus continuing as the surviving corporation and as a wholly owned subsidiary of Parent. The effective time of the merger is sometimes referred to in this proxy statement as the effective time.

 

The closing of the merger will take place on the third business day following the satisfaction or, to the extent permitted by law, waiver of the conditions to closing set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at closing, but subject to the satisfaction or waiver of those conditions at such time). Parent, Merger Sub and the Company shall cause an appropriate certificate of merger to be executed and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The merger will become effective at the time the certificate of merger shall have been duly filed with the Secretary of State of the State of Delaware or such other date and time as is agreed upon by the parties and specified in the certificate of merger.

 

At the effective time, each share of Micrus common stock issued and outstanding immediately prior to the effective time (other than shares owned by Micrus owned as treasury stock and any shares owned by Parent or Merger Sub and shares for which appraisal rights have been properly exercised and perfected under the DGCL), will automatically be canceled and converted into the right to receive $23.40 in cash, without interest and less any applicable withholding taxes.

 

Subject to consummation of the merger, immediately prior to the effective time of the merger, each outstanding option to purchase shares of Micrus common stock, whether or not vested or exercisable, will be accelerated in full, and at the effective time of the merger, each outstanding option will be cancelled and each such option that has a per share exercise price lower than the per share merger consideration will be automatically converted into the right to receive an amount in cash, without interest and less any applicable withholding taxes, equal to the product obtained by multiplying (x) the number of shares of common stock

that would have been issuable upon exercise of such option immediately prior to the effective time of the merger by (y) the excess of $23.40 over the per share exercise price of such Company stock option.

 

The Company’s 2005 Employee Stock Purchase Plan (referred to in this proxy statement as the Purchase Plan) will continue to be operated in accordance with its terms and past practice for the current Purchase Period (as defined in the Purchase Plan) (referred to in this proxy statement as the Purchase Period). The Company will suspend the commencement of any future Purchase Periods under the Purchase Plan unless and until the merger agreement is terminated and will terminate the Purchase Plan as of the closing date of the merger. If the closing of the merger is expected to occur prior to the end of the current Purchase Period, the Company will take action to provide for an earlier Purchase Date (as defined in the Purchase Plan) in accordance with the terms of the Purchase Plan. Such earlier Purchase Date will be as close to the closing date of the merger as is administratively practicable, and the Company will notify each participant in writing at least 10 days prior to the earlier Purchase Date of the earlier Purchase Date, the new Purchase Price (as defined in the Purchase Plan) and that his or her options will be exercised automatically on the earlier Purchase Date unless he or she has withdrawn from the Purchase Period in accordance with the Purchase Plan.

 

Parent will designate a paying agent for the purpose of paying the merger consideration to Micrus stockholders. At or prior to the effective time, Parent will deliver, in trust, an amount sufficient to pay the merger consideration to holders of Micrus common stock (other than Micrus and its subsidiaries and Parent and its subsidiaries and holders who have properly exercised appraisal rights under Delaware law). Promptly after the effective time, Parent will cause the paying agent to mail to each holder of record of Micrus common stock whose shares were converted into the right to receive merger consideration a letter of transmittal and instructions for use in effecting the surrender of such holder’s certificates representing shares of Micrus common stock or the transfer of book entry shares in exchange for the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes, payable with respect to such shares. Those holders of Micrus common stock who properly surrender their certificates representing shares of Micrus common stock or transfer their book entry shares in accordance with the paying agent’s instructions will receive an amount equal to the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes, multiplied by the number of shares of Micrus common stock represented by each such certificate or book entry immediately prior to the effective time. After the effective time of the merger, subject to applicable appraisal rights under the DGCL, each certificate formerly representing shares of Micrus common stock that has not been surrendered will represent only the right to receive the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes, multiplied by the number of shares of Micrus common stock represented by such certificate immediately prior to the effective time.

 

You should not send your Micrus common stock certificates to the paying agent until you have received the transmittal materials from the paying agent. Do not return your Micrus common stock certificates with the attached proxy, and do not forward your stock certificates to the paying agent without a letter of transmittal.

 

If you hold your shares in book-entry form — that is, without a stock certificate — unless you do not vote in favor of the merger and you properly perfect your appraisal rights under the DGCL, the paying agent will automatically send you the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes, in exchange for the cancellation of your shares of Micrus common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Micrus common stock are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee as to how to surrender your “street name” shares and receive cash for those shares.

 

At and after the effective time, there will be no transfers on the stock transfer books of the Company of the shares of Micrus common stock that were outstanding immediately prior to the effective time.

 

If a certificate representing Micrus common stock is lost, stolen or destroyed, the holder of such certificate will be required to deliver an affidavit and may be required by Parent to post a bond as indemnity against any claim that may be made with respect to such certificate prior to receiving the per share merger consideration of $23.40 in cash, without interest and less any applicable withholding taxes.

 

Any portion of the merger consideration that remains unclaimed by the applicable former holders of Micrus common stock one year after the effective time will be delivered to the surviving corporation. Thereafter, a holder of Micrus common stock must look only to the surviving corporation for payment of the merger consideration to which the holder is entitled under the terms of the merger agreement. Any portion of the merger consideration remaining unclaimed by holders of Micrus common stock as of the date that is immediately prior to such time as such amount would otherwise escheat to or become property of any governmental entity will, to the extent permitted by law, become the property of the surviving corporation. Parent, the surviving corporation and the paying agent will not be liable to any holder of shares of Micrus common stock for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

 

Certificate of Incorporation and Bylaws of the Surviving Corporation

 

At the effective time, the Amended and Restated Certificate of Incorporation of Micrus, which is referred to in this proxy statement as the certificate of incorporation, shall, by virtue of the merger, be amended and restated to read as the certificate of incorporation of Merger Sub as in effect immediately prior to the effective time, except that all references to Merger Sub shall be deemed to be references to the surviving corporation. Such certificate of incorporation, as amended and restated, will be the articles of incorporation of the surviving corporation until thereafter changed or amended as provided therein or by applicable law. The bylaws of Merger Sub in effect immediately prior to the effective time shall be the bylaws of the surviving corporation, except that all references to Merger Sub shall be deemed to be references to the surviving corporation, until thereafter changed or amended as provided therein or by applicable law.

 

Directors and Officers of the Surviving Corporation

 

The directors of Merger Sub immediately prior to the effective time will be the initial directors of the surviving corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the surviving corporation until their respective successors shall have been duly elected, designated or qualified, or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation. The officers of Merger Sub immediately prior to the effective time shall continue as the officers of the surviving corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the surviving corporation until their respective successors shall have been duly elected, designated or qualified, or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation.

 

The merger agreement contains representations and warranties made by Micrus relating to, among other things, the following:

 

 

The merger agreement also contains representations and warranties made by each of Parent and Merger Sub relating to, among other things, the following:

 

 

Certain of the representations and warranties of Micrus and of Parent and Merger Sub are qualified as to “materiality” or “material adverse effect.” For purposes of the merger agreement, “material adverse effect” means, with respect to Micrus, any change, effect, event, occurrence, circumstance or development that, individually or in the aggregate, has resulted or would reasonably be expected to result in any material adverse change in, or material adverse effect on, the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole. In determining whether a material adverse effect on Micrus has occurred, none of the following shall be considered:

 

 

However, the exceptions in the first 6 bullet points in the preceding list will not apply so long as any such event has or would reasonably be expected to have a disproportionate effect on the Company relative to other companies in the same industry as the Company.

For purposes of the merger agreement, “material adverse effect” means, with respect to Parent, any change, effect, event, occurrence, circumstance or development that, individually or in the aggregate, would reasonably be expected to prevent or materially impede, interfere with, hinder or delay Parent’s or Merger Sub’s ability to consummate the merger or any of the other transactions contemplated by the merger agreement.

 

The representations and warranties of Micrus are subject to information disclosed in the confidential disclosure schedules delivered by Micrus to Parent and Merger Sub. In addition, the representations and warranties of Micrus are subject to information in Micrus’s SEC filings filed with the SEC prior to the date of the merger agreement, excluding information contained under the caption “Risk Factors” and any other disclosures therein of risks that are predictive or forward-looking in nature.

 

The representations and warranties in the merger agreement do not survive the effective time.

 

Micrus has agreed that, until the effective time or the termination of the merger agreement, except as required by applicable law, with the prior written consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as contemplated or permitted by the merger agreement or as set forth in the Micrus disclosure schedule, the business of Micrus and its subsidiaries will be conducted in the ordinary and usual course of business in all material respects consistent with past practice and Micrus will and will cause its subsidiaries to use commercially reasonable efforts to preserve intact their business organization and maintain their relationships with customers, suppliers and others having business dealings with them. In addition, except as required by applicable law, with the prior written consent of Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as contemplated or permitted by the merger agreement or as set forth in the Micrus disclosure schedule, Micrus has agreed that it will not, and will not permit any of its subsidiaries to:

 

 

 

 

 

 

 

 

Until the effective time, Micrus will, and will cause each of its subsidiaries to:

 

 

Except with respect to antitrust laws, Micrus, Parent and Merger Sub have agreed to use commercially reasonable efforts to:

 

 

 

Micrus and Parent will make an appropriate filing of a notification and report form pursuant to the HSR Act and make all other filings required by applicable foreign antitrust laws with respect to the transactions contemplated by the merger agreement as promptly as practicable and in any event prior to the expiration of any applicable legal deadline (provided that the filing pursuant to the HSR Act will be made within 10 business days after the date of the merger agreement). The merger agreement does not require Parent to agree to, or proffer to, divest or hold separate any assets or any portion of any business of Parent, Micrus or any of their affiliates.

 

Under the terms of the merger agreement, subject to certain exceptions described below, Micrus has agreed that it will not, nor will Micrus authorize or permit any of its subsidiaries or any of its or their respective officers, directors, employees and other representatives to, directly or indirectly:

 

 

The merger agreement also provides that Micrus will, and will direct its representatives to:

 

 

Under the merger agreement, an “acquisition proposal” means any proposal or offer from any third party (other than Parent or its affiliates) to acquire, directly or indirectly in one transaction or a series of transactions:

 

 

Micrus has agreed that promptly (and in any event within 24 hours) after the receipt of any acquisition proposal, Micrus will provide oral and written notice to Parent of such proposal setting forth the financial and other material terms and conditions of such proposal (including any changes thereto) and the identity of the

party making the proposal. Additionally, Micrus is required to keep Parent fully informed of the status and material details (including any changes thereto) of any such acquisition proposal and any substantive discussions and negotiations concerning the material terms and conditions thereof and must provide to Parent as soon as practicable (an in any event within 24 hours) after receipt or delivery of all correspondence and other written material relating to the acquisition proposal.

 

If, following the execution of the merger agreement and prior to the adoption of the merger agreement by Micrus stockholders, Micrus receives a bona fide written unsolicited acquisition proposal which did not arise as a result of a breach of Micrus’s no solicitation obligations under the merger agreement and (1) the Micrus board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel, that such acquisition proposal is, or would reasonably be expected to lead to, a superior proposal, or (2) the Micrus board of directors determines in good faith, after consultation with counsel, that the failure to participate in such discussions or negotiations or to furnish such information would reasonably be expected to be inconsistent with the directors’ fiduciary duties to the Micrus stockholders under applicable law, then Micrus and its board of directors may participate in discussions or negotiations with or furnish information to such party (provided Parent has received or concurrently receives such information and only after any such person enters into a customary confidentiality agreement with the Company which may not provide for an exclusive right to negotiate with the Company and may not restrict the Company from complying with the merger agreement).

 

A “superior proposal” is any bona fide offer made by any person other than Parent and its affiliates that if accepted would result in such person (or its stockholders) owning, directly or indirectly, a majority of the shares of Micrus common stock then outstanding (or of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger) or a majority of the assets of Micrus and its subsidiaries, taken as a whole, which the Micrus board of directors determines in good faith, after consultation with the Company’s outside legal counsel and financial advisors, to be (i) more favorable from a financial point of view to the Micrus stockholders than the terms and conditions of the merger agreement (including any changes to the terms of the merger agreement proposed by Parent in response to such offer or otherwise) and (ii) reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such offer.

 

The Micrus board of directors has agreed to recommend that Micrus stockholders vote in favor of the adoption of the merger agreement, which is referred to in this proxy statement as the Micrus board recommendation, and not to:

 

 

However, at any time prior to obtaining the requisite stockholder vote (as described under “— Conditions to the Completion of the Merger”) the Micrus board of directors may, if the Micrus board of directors determines in good faith, after consultation with its outside legal counsel and financial advisor, that the failure to take such action would be inconsistent with the Micrus board of directors’ fiduciary duties under applicable law:

 

 

During such five day period, Micrus and its representatives shall negotiate in good faith with Parent and its representatives regarding any revisions to the terms of the merger agreement proposed by Parent.

 

Micrus has agreed to file this proxy statement with the SEC as promptly as practicable following the date of the merger agreement and to cause the proxy statement to be mailed to Micrus stockholders as promptly as practicable following the date of the merger agreement. Micrus and Parent have agreed to use commercially reasonable efforts to respond as promptly as practicable to any comments received from the SEC.

 

The merger agreement requires Micrus to, in accordance with applicable law, the Company certificate of incorporation and bylaws and applicable securities exchange rules, establish a record date for, duly call, give notice of, convene and hold a special meeting of the Micrus stockholders for the purpose of obtaining the requisite stockholder approval. Subject to certain exceptions described above (see “— Recommendation of the Micrus Board of Directors”), the Micrus board of directors has agreed to include the Micrus board recommendation in this proxy statement. Micrus may extend, postpone or adjourn the annual meeting to the extent required by applicable securities laws or in order to obtain a quorum.

 

The merger agreement provides that, for a period of 12 months following the effective time of the merger, Parent agrees to (i) provide, or cause its subsidiaries to provide, to employees of the Company and its subsidiaries who are primarily employed in the United States (referred to in this proxy statement as US Employees) who remain in the employment of the surviving corporation base salary or hourly wage rates that, on an individual-by-individual basis, are not less than those provided to such US Employees immediately prior to the effective time of the merger and (ii) either (A) maintain, or cause its subsidiaries to maintain, the material benefit plans of the Company (excluding any equity-based compensation) at the benefit levels in effect immediately prior to the effective time of the merger, or (B) provide, or cause its subsidiaries to provide, employee benefits (excluding any equity-based compensation, defined benefit pensions or retiree medical benefits) that are no less favorable to each US Employee, in the aggregate, than those in effect for such US Employee immediately prior to the effective time of the merger.

 

Parent will, or will cause the surviving corporation to, recognize the service of each US Employee as if such service had been performed with Parent (i) for purposes of vesting (but not benefit accrual) under

Parent’s defined benefit pension plan, (ii) for purposes of eligibility under Parent’s 401(k) retirement plan, (iii) for purposes of eligibility for vacation under Parent’s vacation program, (iv) for purposes of eligibility and participation under any health or welfare plan maintained by Parent (other than any post-employment health or post-employment welfare plan) and (v) unless covered under another arrangement with or of the Company, for benefit accrual purposes under Parent’s severance plan, in each case, solely to the extent that Parent makes such plan or program available to such employees of the surviving corporation and not in any case where credit would result in duplication of benefits, but not for purposes of any other employee benefit plan of Parent. Parent will, or will cause the surviving corporation to, (A) reduce any period of limitation on health benefits coverage of US Employees due to pre-existing conditions (or actively at work or similar requirements) under the applicable health benefits plan of Parent or an affiliate of Parent by the number of days of an individual’s “creditable coverage,” to the extent required by Section 701 of ERISA, (B) waive any and all eligibility waiting periods and evidence of insurability requirements with respect to such US Employees to the extent such eligibility waiting periods or evidence of insurability requirements were waived with respect to the US Employees under the Company’s benefits plans and (C) credit each US Employee with all deductible payments, out-of-pocket or other co-payments paid by such employee under the health benefit plans of the Company or its affiliates prior to the closing date of the merger during the year in which the closing occurs.

 

Parent will cause to be provided to employees of the Company and its subsidiaries who are primarily employed outside the United States with employee benefits in accordance with applicable law.

 

The merger agreement further provides that no provision of the merger agreement will (i) create any right in any employee of the Company to continued employment by Parent, the surviving corporation or any affiliate of Parent, or preclude the ability of Parent, the Company, the surviving corporation or any respective subsidiary thereof, to terminate the employment of any employee for any reason or (ii) require Parent or the surviving corporation to continue any benefit plan or prevent the amendment, modification, or termination thereof after the date of the closing of the merger. The merger agreement also provides that the employee benefit matters provision of the merger agreement described above will be binding upon and will inure solely to the benefit of the parties to the merger agreement.

 

Pursuant to the merger agreement, from and after the effective time of the merger, Parent has agreed to, and to cause the surviving corporation to, assume all obligations existing in favor of the current or former directors or officers of the Company or any of its subsidiaries with respect to all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger as provided in the certificate of incorporation or bylaws of the Company. The certificate of incorporation and bylaws of the surviving corporation will contain the provisions with respect to indemnification and advancement of expenses set forth in the certificate of incorporation and bylaws of the Company as amended, restated and in effect on the date of the merger agreement, which provisions may not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of the Indemnified Parties, unless such modification is required by law.

 

Parent has agreed to obtain, at the effective time of the merger, a prepaid (or tail) directors’ and officers’ liability insurance policy in respect of acts or omissions occurring at or prior to the effective time of the merger for six (6) years from the effective time of the merger, covering each person currently covered by the Company’s directors’ and officers’ liability insurance policy on terms with respect to such coverage and amounts no less favorable than those of the Company’s current policy; provided , that, Parent shall not be obligated to pay more than $700,000 in the aggregate in satisfying such obligation. In the event such a policy cannot be obtained for $700,000 or less, Parent has agreed to obtain as much coverage for not less than six (6) years from the effective time of the merger as may be obtained for such $700,000 in the aggregate.

 

The merger agreement contains other covenants and agreements, including covenants and agreements relating to cooperation between Parent and Micrus in the preparation of public announcements regarding the

merger, efforts to render state takeover laws inapplicable, sharing of notifications from governmental entities in connection with the merger, obligations of Merger Sub, steps reasonably necessary to cause dispositions of the equity securities of Micrus to be exempt under Section 16 of the Exchange Act, certain tax matters and providing access to Micrus information and personnel.

 

The respective obligations of each of the parties to complete the merger are subject to the satisfaction or, to the extent permitted by law, waiver of the following conditions:

 

 

The obligations of Parent and Merger Sub are subject to the satisfaction or, to the extent permitted by law, waiver of the following conditions:

 

 

The obligations of Micrus are subject to the satisfaction or, to the extent permitted by law, waiver of the following conditions:

 

 

 

No party may rely on the failure of any condition set forth above to be satisfied if such failure was caused by such party’s failure to act in good faith or use its commercially reasonable efforts to consummate the transactions contemplated by the merger agreement.

 

Micrus can give no assurance that all of the remaining conditions will either be satisfied or waived.

 

Parent and Micrus have agreed that, whether or not the merger is completed, all costs and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring such costs and expenses.

 

The merger agreement may be terminated and the transactions contemplated thereby abandoned at any time prior to the effective time, whether before or after the receipt of the requisite stockholder approval, under the following circumstances:

 

by the mutual consent of the Company and Parent;

 

by either the Company or Parent:

 

 

by the Company:

 

 

by Parent or Merger Sub:

 

 

Micrus is required to pay Parent a termination fee of $13,250,000 if the merger agreement is terminated under the following circumstances, such payment to be made concurrently with such termination in the case of the first bullet below, on the fifth business day following termination in the case of the second bullet below, or upon entry into a definitive agreement with respect to, or completion of, an acquisition proposal in the case of the third bullet below:

 

 

Micrus and Parent have agreed that in no event shall Micrus be required to pay the termination fee on more than one occasion. Upon payment of such fee, the Company shall have no further liability to Parent or Merger Sub with respect to the merger agreement, provided that nothing in the merger agreement releases Micrus from liability for fraud or knowing and intentional breach of the merger agreement.

 

Parent shall pay to Micrus a termination fee of $10,000,000 (payable concurrently with any termination by Parent or within five business days of any termination by the Company) if the merger agreement is terminated by either Parent or Micrus pursuant to their respective rights described in the first or second bullet points under “— Termination of the Merger Agreement” by either the Company or Parent and at the time of any such termination all of the conditions set forth in “— Conditions to Completion of the Merger” have been satisfied or waived, except for the conditions described in the second, third or fourth bullet points under the first paragraph of, or in the third bullet point under the second paragraph of, “— Conditions to the Completion of the Merger” (in the case of the conditions described in the second bullet point under the first paragraph of, and in the third bullet point under the second paragraph of, “— Conditions to the Completion of the Merger,” only to the extent that the conditions set forth therein have not been satisfied due to a suit, action or proceeding by any national governmental entity or the imposition of a restraint, in either case relating to competition, merger control, antitrust or similar laws). Upon payment of such fee, Parent shall have no further liability to the Company with respect to the merger agreement, provided that nothing herein shall release Parent from liability for fraud or knowing and intentional breach of this Agreement.

 

The merger agreement is governed by the laws of the state of Delaware and provides that any litigation relating to the merger agreement or the transactions contemplated by the merger agreement will be maintained in Delaware state courts and federal courts located in Delaware.

 

Parent and Micrus have agreed that the merger agreement may be amended, modified and supplemented, whether before or after any vote of the stockholders of the Company, by written agreement of the parties to the merger agreement, at any time prior to the effective time with respect to any of the terms contained therein; provided, however , that after the receipt of the requisite stockholder approval, no such amendment, modification or supplement that by law requires the approval of the stockholders of the Company shall be effected without the approval of such stockholders.

 

The parties to the merger agreement also agreed that any failure of any of the parties to comply with any obligation, covenant, agreement or condition contained in the merger agreement may be waived by the party or parties entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

 

Except for the rights of Micrus stockholders and option holders to receive merger consideration and for provisions described above under “— Indemnification and Insurance,” to which the persons referenced therein are third party beneficiaries, the merger agreement is not intended to confer upon any other person other than the parties thereto any rights or remedies.

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information regarding beneficial ownership of our common stock as of July 22, 2010 (except as noted) by:

 

 

Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC and include voting or investment power with respect to shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, shares of common stock issuable under stock options that are exercisable within 60 days of July 22, 2010 are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

 

Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over its shares of common stock, except for those jointly owned with that person’s spouse. Percentage of beneficial ownership is based on 16,585,666 shares of common stock outstanding as of July 22, 2010.

Unless otherwise noted below, the address of each person listed on the table is c/o Micrus Endovascular Corporation, Attn: CFO, 821 Fox Lane, San Jose, California 95131.